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EURNZD: Top Trade Idea to Close Out 2017

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On December 6 I wrote about how the EURNZD rally could be coming to an end. At the time the pair was trading at 1.7132, approximately 200 pips above ascending wedge support from the June low.

Fast forward to today and we can see how sellers are starting to chip away at this rally. Although prices are still above wedge support, there are now less than 100 pips separating today’s price and the key support level.

Rising and falling wedges tend to act as reversal patterns. It’s a structure that signals exhaustion from either buyers or sellers. Because this is a rising wedge, we know that it’s buyers who are getting tired.

Many traders use indicators such as the RSI or MACD to look for negative divergence. It’s when a particular indicator is heading higher while the market price is moving lower or vice versa.

But when using patterns like a rising or falling wedge or even sloping flags, you don’t need those indicators. I know there’s negative divergence here; there always is during the second half of a rising or falling wedge.

Now that we know EURNZD bulls are tiring, the key is to wait for a confirmed break. That won’t happen until sellers can secure a daily close (New York 5 pm EST) below wedge support between 1.6960 and 1.7000. We should know the exact price within the next few days.

I’ve titled this post the top trade idea for 2017, but it’s anyone’s guess as to whether this structure will confirm this year or next. My guess is we’ll see a breakdown within the next couple of weeks, but anything is possible.

A daily close below support near 1.6960 – 1.7000 would expose the November low at 1.6620. A close below that would open the door to the next key support at 1.6140.

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EURNZD rising wedge pattern on daily chart

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8 comments
MICHELE says

very good

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Matthew says

I like your analysis.
Thanks Justin.
Teach us all how to trade better!

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Ryan says

So happy you are looking At this one Justin! One of my favorite pairs to trade.
Looking at weekly ascending channel (simply moved the upper trendline to the next swing high creates channel) super strong support at 100 WMA as well as trendline is right at 1.696 like u said. Traders are looking at this one as both a wedge and channel so good to see both sides, IMHO. I’ve been excited about this trade since the first weekly bearish pin bar from the week of 10/22. I’m also looking at a daily trendline that follows the 50dma and is right at 1.692. Would really like to see a break there but at any rate too. Monthly chart shows we could see 1.45ish if the trade was held long enough. No reason not to hold it as it’s one of the best paying carry trades one could take.
Flip side, if it bounced off the 200wma/50dma/trendline, we get a high probability to see 1.80 area at the top of the channel/200mma and monthly high of 9/15. Yes, long term, but it comes quick with this pair. Thanks for letting me ramble 😉

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    Howard says

    On daily, I can see the up momentum waning, unable to get to top of channel on 12/1 which also left a small upper tail & supply zone in place. (My upper channel line is parallel, rather than converging as Justin’s)

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Steven says

Thanks Justin again for update👍

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Doel says

On the down side the previous support 1.7070 was recently broken and it was a 1 day BO candle, as of the moment the price reacted at 1.6952 a trendline support, if it will be broken by a BO 1 day candle i think it is good to go short. But on the up side if the 1.7070 resistance will be broken by an H4 or d1 candle, long order is a good option.

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Doel says

Thank you sir justin, i actually follow your analysis.. I just want to add may it will help. i think the ideal trendline for EN is from price 1.46002 to 1.7463 instead of 1.6228 to point 1.74052.tnx

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Farai says

Good analysis Justin

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