The EURNZD has launched a massive rally over the past few trading weeks as visible in this D1 chart. After this currency pair broke-out above its 200 DMA it rallied as expected before it corrected back down to its ascending support level from where it bounced higher and now formed a double top formation which is a bearish chart pattern. We believe this currency pair will correct and break-down below its ascending support level and back down to its 200 DMA.
MACD indicates that momentum has been fading during the rally and has already broken down below its centerline before snapping higher again. We expect a bearish centerline crossover to occur as ascending support will be broken. RSI is trading in overbought territory and formed a lower high than during the previous peak in price action.
We recommend a short position at 1.7100 with a potential second entry level at 1.7300.We also recommend a stop buy order at 1.7200 in order to hedge the initial short position and before adding new short positions to this trade.
Traders who wish to exit this trade at a loss are advised to place their stop loss order at 1.7200. We will not use a stop loss order and execute this trade as recommended. Place your take profit level at 1.6500.
Here are the reasons why we call the EURNZD currency pair lower
- The EURNZD currency pair has formed a double top formation which is a bearish chart pattern
- MACD indicates momentum is fading away and did not confirm the recent leg higher as it already flirts with a bearish centerline crossover
- RSI is trading in overbought territory and formed a lower high
- Profit taking after a very strong rally in order to lock in profits
- New short positions by institutional swing traders
- Ongoing Eurozone debt crisis