The EURNZD has been in rally mode throughout 2017. The pair has gained nearly 3,000 pips since the 2017 low was carved out on February 7.
It has been an impressive rally, but every uptrend has a breaking point. The question is, what type of pattern could signal exhaustion from bulls?
The rising wedge that has been developing since the May to June period might be it. These structures suggest exhaustion and often signal at an imminent reversal.
To be clear, there isn’t anything for us to do just yet. The price is still well above wedge support, which would need to break down before we can label this a legitimate selling opportunity.
It’s going to take a daily close (New York 5 pm EST) below support between 1.6950 and 1.7000. Such a break would expose the next key support at 1.6620 followed by 1.6140.
Rising and falling wedges tend to target the swing high or low that started the pattern. In the case of the EURNZD, that would be the June low at 1.5234.
Keep in mind, however, that a move of that magnitude would likely take several months to play out. So instead of aiming for such an ambitious target, it may be better to focus on areas such as 1.6620 or 1.6140.
All of the above hinges on what happens at wedge support. Until sellers secure a daily close below the five-month support level, a seat on the sideline seems appropriate.