Recent EUR/NZD price action looks like a potential reversal in the works, especially with some fresh economic catalysts pushing the pair around this week.
Double Top on EUR/NZD?
Up above, we’ve got a simple technical setup on the four-hour EUR/NZD chart, basically a retest of the strong resistance area we saw back in May that turned out to be a major reversal area. We actually can see a small double top formation at that previous resistance area over the last couple of weeks, which can be looked upon by traders as a potential short signal a proven resistance are.
Fundamentally, we just got positive reads from New Zealand in the form of the quarterly producer prices data and the retail sales data, which could provide underlying support for the Kiwi in the short-term. But the main market mover that I’m focusing on for the short-term is the recent shift in sentiment on the euro. We’re seeing recent weakness after the minutes from the latest European Central Bank meetings shows concern on growth and there is no signal for a shift to tightening from the ECB at the Jackson Hole event. I think these themes could last through the rest of August with a lack of major events ahead on the forex calendar.
But with the stochastic indicator just coming out of oversold territory on the four hour chart, I’m hesitant to enter a short now as I think we’ll get a little more bounce after today’s incident in Barcelona involving 13 deaths is igniting risk-off flows.
So, no new trade orders for now, but if the market does get much closer to that mini consolidation around around 1.6150, I may take a short there to play the strong resistance, big potential R:R, and yield advantage of the Kiwi over the euro.
Be on the lookout for a new trade idea in the next session or two, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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