The validity of the EUR/NZD downtrend is confirmed by multiple rejections of resistance indicators. This should result in more selling pressure over the next 24 hours.
Disclaimer: The analysis presented in this article is for educational purposes only and should not be considered as financial advice.
This analysis was done on MetaTrader 4.
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Trade Idea Details:
Key support levels: 1.7580
Key resistance levels: 1.7870, 1.7980
Price Action: on the 4-hour chart EUR/NZD formed a strong resistance area near 1.8260, which has been rejected multiple times in a row. Besides, price broke below both 200 Moving Averages, Simple and Exponential, suggesting the validity of the downtrend. We can also see that on May 29, both MAs were rejected yet again, which could be the starting point of another wave down. While the long term downtrend seems to be valid, it is yet to be seen whether EUR/NZD manages to break below the 1.7600 previous low. This is the reason the potential target being at this price area.
If we look at the 1-hour chart below, it is clear that both Moving Averages were rejected on both timeframes, 1h and 4h. Price attempted to break above the most recent MA bounce but failed to close above. On the attempt to go higher, 1,7866 where EUR/NZD cleanly rejected 38.2% Fibonacci retracement level. This makes 1.7866 a key short term resistance which should help to determine the direction of the next wave. Should 1h close be above this resistance, the bearish sentiment should be invalidated and EUR/NZD will be expected to reverse to the upside.
But, as long as resistance holds, EUR/NZD is expected to hit 1.7580 support area, confirmed by two Fibonacci retracement levels. Both Fibonacci indicators were applied to the corrective wave up after breaking 50 Simple Moving Average. And we have 461.8% and 727.2% Fibs corresponding to one level, which is 1.7575.
Potential Trade Idea:
The short term resistance has been formed at 1.7860, making it an ideal entry point for selling EUR/NZD. Today price has reached 1.7866 high, which is a key resistance level. Clean break and close above this level on the hourly chart would be considered as an exit signal, where the bearish scenario will be invalidated. But as long as the price remains below, the downside target could be near 1.7580. On the flip side, the stop loss could be placed at 1.8040.
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