EURNZD Medium-Term
Back in November, we identified a very interesting pattern in EURNZD, the famous Elliott Wave pattern. In November, the pair was in a bearish trend, forming a corrective “A” wave to the downside, following a confirmation of 5 Elliott Waves movements (the dominant Trend was placed between January 2017 – September 2018).
Since then the Elliott’s model has been fully deployed, as the asset illustrated a rebound from 1.6360 on December 5, the “B” wave in the Elliott’s corrective 3-wave trend. The B-wave ended on January 3, after it peaked at a 1.7207 high. From the time of that reversal, the asset entered the 3rd phase of the Elliott wave model, i.e. “C” wave, by trading in a down channel, with the latest low swing at 1.6292. The breach of this area confirmed our forecasts as stated in November’s post below:
Today’s break of the 4-month low, opened the doors for the 1.6235-1.6360 area, set at the latest swing lower (November 2017) and the 50% Fibonacci retracement level. Further gains could then target the 61.8% Fib. level at 1.5830.
Despite Kiwi’s tumble by 1.5% on RBNZ’s dovish turn overnight, the above statement remains strongly alive. The EURNZD is holding within a down channel, by forming lower highs in the medium term, with attention on the downside, on the already re-opened area at 1.6235-1.6360, with risk for further declines rising. Momentum indicators comply with this 5-month bearish outlook, as RSI and MACD are negatively configured, in the daily and weekly frame, suggesting the continuation of the fall.
On the break of this area, the next leg lower could be found between the 1.5835-1.5890 area, which presents the 127.2 Fibonacci retracement level set on wave A and the 61.8% Fib. level on the 2017-2018 rally.
Theoretically however, we need to mention that the “C” wave is typically at least as large as wave A and often extends to 1.618 times wave A or beyond. This could lead below the 1.5400 barrier.
In the near term, correction to the upside could occur as the overall bias is negative, with immediate Resistance at 1.6600 and 1.6740.
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Andria Pichidi
Market Analyst
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