The EUR/NZD long term downtrend should be expected to continue, along with many correlated pairs, such as CHF/AUD, CHF/NZD, and EUR/AUD. This Monday these pairs could have touched key resistance levels and as long as they hold price should move lower. On the EUR/NZD, this price was 1.7507, and as long as pair trading below, it will move towards the 1.6994 support.
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: 1.7184, 1.6994
Key resistance levels: 1.7507, 1.7650
On the 4h chart, EUR/NZD broke above the average-price uptrend trendline and on the pullback rejected the trendline. After the rejection, price continued to trend down and broke 200 Simple and Exponential Moving Averages and reached 1.7655 low.
However, then, since April 29, the price has been consolidating between the 1.7655 support and 1.8275 resistance areas. This was a huge 600 pip wide range for EUR/NZD, which has ended on June 02, when pair broke below the support.
This was a strong confirmation that the downtrend is likely to continue and as we can see, EUR/NZD continues to produce lower lows and lower highs. On the latest correctional move up, the price has reached and rejected the previous area of support, which now is obviously a resistance. This is yet another signal of the downtrend validity and therefore pair should be expected to move lower.
The key support is seen at 1.6994, which is confirmed by two Fibonacci retracement levels. First is the 427.2% Fibs applied to the corrective wave up after breaking the average-price uptrend trendline. The second is 88.6% Fibs applied to the overall uptrend, as per the daily chart below.
Potential Trade Idea: The ideal entry price for the bears could be near or at 1.7400 psychological resistance, with the downside target at 1.7000. The stop loss should be not lower than 1.7600 to meet the 1:2 risk/reward ratio, although if price manages to break and close above 1.7410, that should be treated as the first warning sigh where risk-taking must be reduced.