The pair has been in a wide ranging downward channel since August 2013. There was recently an overshoot below the channel line which caused a sizeable contra trend move that was then rejected at a pivot low from November last year. The reversal was strong creating a shooting star like candle. The high of the candle coincided with the 1.5815 Fibonacci level, while the pivot low from November is at the approx. region of the 50% Fibonacci level. Price is approaching the lower end of the recent range as well as the lower end of the bearish channel.
EURNZD has broken out of the recent downtrend and has now retraced back to the trendline. This level also coincides with 61.8% Fibonacci level and a candle high of a recent pivot at 1.5171. Stochastics are oversold and there has been a tick higher in the indicator suggesting momentum might be reversing here. The resistance level at 1.5346 is the weekly pivot candle low and could therefore be a significant resistance. The pair has also created a higher low and a higher high, suggesting bullishness inside the long term down trend.
EURNZD, 240 min
The short term trend is down but the Stochastics indicator is signalling bullish divergence here (price makes a lower low but the indicator a higher low). The nearest support level is 1.5172 which also coincides with the 61.8% Fibonacci Retracement level. Price is testing the short term trendline at the time of writing and should the breakout happen here, the first test for the bulls is the 1.5319 resistance level while the next resistance level is at 1.5507.
The long term picture is bearish as the price has been trending lower for quite some time and still is inside the downward channel. However, the channel width is huge and the contra trend moves can and have been sizeable. This leaves room for swing trades in both directions. The current price action is taking place at a combination of technical factors: trendline support (former daily downtrend), pivot candle high and 61.8% Fibonacci level. In addition we have oversold Stochastics in the daily time frame and the bullish divergence in the 4h hour chart. All this points out to a possibility of price turning higher from the proximity of current price levels, but we should remember that this level is mid-rage in the daily time frame and trade accordingly (smaller time frame trade ideas in accordance with how the price reacts to trendlines and S&R levels). These smaller resolution based trade ideas can then be turned into swing positions should the price action validate the bullish indications the daily chart. We now have a daily higher low and higher high, which suggests bullishness. If however the 1.5171 support level is decisively broken, then the next level that I find interesting for short exits and long entries is close to the 1.4940, an area where the daily Bollinger bands currently reside.
Chief Market Analyst
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.