EURNZD with a beautiful Head and Shoulders pattern
|The beginning of the year is especially promising for the currencies from the antipodes: AUD and NZD. In the same time, we can see a bit of weakness in the common European currency, which automatically puts our attention on the possible bearish sentiment on the EURNZD. Is the sell signal there or our assumption is wrong?
If we look on the chart, technical analysis is very clear about the current situation – it is bearish. For almost whole 2017, the price was climbing higher but during the last quarter of 2017, EURNZD created a strong reversal pattern – Head and Shoulders formation. (SHS). The formation is active because we already broke the neckline (black). What is more, in December, sellers managed to break the long-term up trendline (red) and in addition to that, they already tested it (with a success!), as a resistance. Last but not least, we managed to break the 23,6% Fibonacci.
As you can see, the technical analysis favours bears and promotes the scenario where price should test the 38,2% Fibonacci soon. That makes it a decent mid-term trading opportunity with a potential for 280 pips movement. Sell signal will be denied, once the price will come back above the 23,6% which for now is less likely to happen.
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