The EURNZD had one of its largest weekly gains last week following a 180 pip gap up from the Euro. We have to go all the way back to January of last year to find a larger five-day rally.
But even the most volatile and substantial moves have pullbacks, and the EURNZD is no exception. Although the previous week’s rally ended near its high, Friday’s session found sellers at a significant level.
I’ve written about using channels to find potential reversal areas and the price action since March is an excellent example. As you can see from the chart below, using this technique we could have predicted with a high degree of conviction that the 1.5920 area would attract sellers.
If we get a daily close below the 1.5760 area, there’s a good chance we’ll see the EURNZD slide lower toward the 1.5500 region. However, keep in mind that any pullback here could be corrective given last week’s rather convincing bull move.
Also, with the May 7th run-off election in France fast approaching I’ll be hesitant to take on any Euro exposure. I’m anticipating another gap for the single currency to start next week regardless of which candidate comes out on top.
Moreover, although a currency cross like the EURNZD is relatively insulated from a Fed rate decision and non-farm payroll, the events on Wednesday and Thursday of this week could stir things up.
So, for now, I’m just watching from the sideline. If nothing else, having a prominent channel like this on my chart makes reading future price action that much easier.
Note that New Zealand reports employment figures at 6:45 pm EST.
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