Today we detected a scenario with excellent potential in EUR / NZD and we want to share with you in detail our process to develop a setup in this pair. First of all, we must clarify that it is a SWING setup, with a resolution of several days or probably weeks, so this vision does not imply that there cannot be movements against this vision in short-term micro trends.
Now, what can we detect in the Weekly Chart?
🔸 First, we observe that at the beginning of the year the price generated a great rejection in the area of the Ascending Channel, and also coincides with a supply area of 2011.
🔸 After that, the behavior was entirely bearish, until now it is facing / penetrating the Ascending Trendline of the channel that has been formed since 2017.
🔸 As we always say, we do NOT anticipate the price, nor do we seek to guess a direction. We simply react to behaviors that we consider to have a high probability of success.
🔸 What does that mean? It means that, in case of looking for a bearish trade in this pair, we will not simply operate a break of the trendline, that is only the first step of the confirmation.
What do we need to develop a setup?
Will be looking for the following scenario:
🔸 Moving to a lower timeframe (4H), we detected a breakout of the bearish channel and also the Support zone.
🔸 What we now expect is a corrective movement in the current zone, and if possible a retest to the broken Support zone (at that time it will be Resistance).
🔸 Once the corrective structure is formed, that will allow us to safely position our entry level, stop loss and take profit.
🔸 We always look for Risk / Reward ratios greater than 1.5.