Forex Trade Idea: EUR/NZD Resistance Turned Support

Hey everyone! I’m currently looking at this textbook retracement setup on EUR/NZD for my forex trade this week. What do you guys think?

There’s a neat trifecta of technical signals on this pair at the moment, with price pulling back to the resistance turned support around the 50% Fibonacci retracement level. At the same time, a bullish divergence also seems to be forming since EUR/NZD made higher lows while stochastic is drawing lower lows.

EUR/NZD 4-hour Forex Chart

EUR/NZD 4-hour Forex Chart

Fundamentals suggest that a bounce could take place around these levels since Greece is just a few steps shy of receiving its third set of bailout funds, which would enable it to meet its loan obligations to the ECB this week. Assuming everything goes according to plan, euro bulls might take this as their cue to charge and push EUR/NZD back up to the previous highs at the 1.7100 handle.

As for the Kiwi, I’m thinking that New Zealand’s global dairy trade auction this week would reflect another fall in prices and that the quarterly PPI readings might disappoint as well. This could convince more forex junkies that another RBNZ rate cut is in the cards, possibly leading to a sharp selloff for the New Zealand dollar.

I’m just waiting for additional confirmation from candlesticks and for the setup to meet the 9 Rules for Trading Divergences before going long around my entry area between 1.6750-1.6800. I’ll set a stop below the 61.8% Fib and an initial target at the previous highs.

Cheers,

Happy time

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  • Ken

    HappyPip the chart looks beautiful. Textbook example of hidden divergence, very clear target and stop area with an excellent R/R if you can get in somewhere in the support range.
    My only concern is, I’m skeptical that TA is relevant on EUR/NZD. The amount of buying and selling between these currencies must be a tiny fraction of EUR/USD and NZD/USD. The relationship between the Euro and the Kiwi is a derivative of the two dollar-based pairs and I think what appears to be support and resistance on this chart is just a coincidence.
    I hope I’m wrong and wish you luck. The chart is beautiful. I wish it was on one of the traditional comdolls instead or maybe AUD/NZD as those two minor currencies engage are significant trading partners.
    Good luck Trader!

    • Thanks for sharing your thoughts! Fortunately it turned out in my favor. I’ll look into those pairs you mentioned though.

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  • Mark

    If your still long today then you would be smiling.

    • Ha, yeah I wish I held on until it reached the 1.8000 areas. However, my PT got hit pretty quickly last week. Think I should reenter?