Aha! I’m finally seeing a breakdown on EUR/NZD as the pair validated a short-term reversal pattern, signaling further bearish momentum. Here’s what I’m talkin’ about!
In my trade watchlist blog post at the beginning of this year, I mentioned I was looking at a double top pattern on the pair’s 1-hour chart. However, the neckline kept holdin’ like a boss so I thought that the formation was already invalidated. Lo and behold, another top formed and price finally broke below the 1.5000 major psychological level!
This chart formation is around 200 pips tall so the pair has enough room to head south, possibly at least until the 1.4800 area. Looking at the longer-term chart suggests that it might even set its sights a lot lower since it also broke below the mid-channel area of interest.
Comdolls have been on a tear lately, taking advantage of dollar weakness and flexing their muscles against their European rivals. The outlook for the Chinese economy seems to be turning positive, even after a couple of data misses, as leading indicators have hinted at stronger growth in the manufacturing and non-manufacturing sectors.
On the other side of the world, Europe isn’t looking too good as Brexit jitters are weighing on both the euro and sterling. Headlines seem to be suggesting a stronger likelihood for a “hard Brexit” which would be damaging for the EU economy if the single market loses one of its heavyweights. U.K. Prime Minister Theresa May has a highly-anticipated speech lined up today so this pair could be treated to additional volatility.
Here’s what I have:
Short EUR/NZD at 1.4915, stop loss at 1.5315, profit target at 1.4515 for a 1:1 return-on-risk. I’m risking 0.5% of my account on this setup and I’ll be ready to trail my stop to entry once price tests the 1.4800 area.
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.
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