I’m a bit bummed out about missing this short opportunity on EUR/NZD earlier this week, but I’m keeping my one eye locked on this descending channel play.
You see, I was thinking of selling this pair right at the top of the channel around the 1.5600 major psychological resistance yesterday, but price suddenly made a sharp drop while I was still in the middle of making my fundamental analysis and risk management plan! Argh!
Anyway, I still think the descending channel is worth watching, especially if price makes a correction to those Fib levels. In particular, the 61.8% retracement level looks like a nice entry point since it’s close to the top of the channel, an area of interest, and the 1.5450 minor psychological resistance.
Stochastic is already indicating oversold conditions so I think sellers might need to take a break soon and allow buyers to push for a pullback. Besides, traders might be booking their profits ahead of the weekend so a quick bounce could be in order.
I’m keeping a bearish bias on this pair mostly of the ECB’s preference to increase stimulus in order to keep the euro zone economy supported even with the Brexit. In contrast, the RBNZ has signaled that it has no plans to lower interest rates further anytime soon as this might spur greater financial instability, given their housing market concerns.
For now, I’m still waiting for better signs of a pullback on this pair, although I also do think that a downside break of the channel support might be possible. If that happens, I won’t rush into any trades because a downside break doesn’t seem to offer a good R:R based on my framework.
As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups!