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New Zealand Dollar to Break 10 Year Support Line Against Euro

Friday, 25 January 2008 15:50:58 GMT

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Written by Jamie Saettele, Technical Currency Strategist
The EURNZD has consolidated in the form of a triangle since the September high at 2.0185. Prior to the formation of the triangle, the pair rallied over 3,000 pips in less than 2 months! Triangles are continuation patterns, so the next move is higher; and probably violently so.      

01-25-08weekly1

As mentioned, a triangle is unfolding from the September high. Triangles unfold in 5 waves (a-b-c-d-e) and wave d is close to complete. Therefore, expect additional consolidation in wave e (down) before a terminal thrust higher in larger wave C completes the entire rally from the July low at 1.7029. Price should remain above 1.8510 (bottom of wave c of the triangle) but is likely to remain above what is the low of the month so far at 1.8734 (January 15th low). The next move up should be significant. Minimum expectations are for a rally to exceed 2.0185 but bullish potential is much greater. Notice also how the 200 day SMA is acting as a springboard for this expected explosive move upward.  Be sure to visit the Elliott Wave forum for trading ideas and updates to this pattern.

01-25-08weekly2

Since October 1998, a well defined downward sloping line has defined the trend. This line has been touched 5 times now, including a false break in July 2006. The more that a trendline is touched and the longer that the line remains intact, the more violent the breakout will be when it does occur. Given the shorter term pattern on the daily chart, that breakout is likely to occur in the next few months. Now is the time to position for this move.  
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