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EURNZD Pressure Builds as Terminal Pattern Nears Completion

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EURNZD has entered the final stage of consolidation after coming off the current 2016 high by more than 1,000 pips. As is the case with most technical structures, the multi-month pattern can be viewed a couple of different ways.

One view shows a descending channel that extends from the August 2015 high.

EURNZD descending channel on the daily chart

Based on the chart above and without considering other factors, a short from current levels might appear to be the most appropriate move. However, blindly entering at resistance doesn’t provide you with an edge. In other words, it does nothing to stack the odds in your favor aside from selling at resistance.

Also, the notion that the price action since April of 2015 has created a massive bull flag pattern is enough to keep me away from selling the pair at current levels. While the formation is by no means confirmed, the overall appearance of the structure in the chart above doesn’t strike me as overly bearish.

So rather than playing this as a channel, I prefer the wedge pattern you see in the chart below. The implications of a bullish break are the same, only now we have a way to identify and confirm a bullish or bearish break.

EURNZD wedge pattern

The wedge pattern above offers two possible scenarios, both of which come with a favorable risk to reward ratio. Also, by allowing this terminal pattern to break down first before considering a position, we’re allowing the market to make the first move which in turn offers a higher degree of conviction to any future trade setup.

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EURNZD terminal pattern on the daily chart

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4 comments
Shaon says

Perhaps next week Justin 🙂

Reply
    Justin Bennett says

    Shaon, next week it is. Only it’s a break to the downside, which is fine by me.

    Reply
Sal says

Justin, great catch on that descending channel. Honestly, I had been completely focused on the wedge pattern and a descending channel never dawned on me. However, I will say that based on that article you put out a week ago, the speed at which it came back to the top of the descending channel gave it a further bullish signal no?

Reply
    Justin Bennett says

    Sal, it did, however, it appears we now have a break of support on our hands.

    Reply
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