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EURNZD Bulls Look Better Going into December

Yesterday, we shared our view that despite being down by over 460 pips this month, a bullish reversal can be expected in EURAUD around 1.5500. Now, we are going to take a look at EURNZD, which lost even more in November. The pair plunged from 1.7359 to 1.6515 in the last thirty days, following a decline from 1.7929 in October.

In other words, EURNZD bears caused a selloff of over 1400 pips in the last two months alone. Should we expect more of the same going into December? Let’s take a look at the pair’s collapse through the prism of the Elliott Wave Principle on the 2-hour chart below.
EURNZD Forex chart Elliott Wave forecast
The 2h chart visualizes EURNZD’s entire crash from 1.7929 on October 8th to 1.6515 on November 28th. As visible, it has taken the shape of a five-wave impulse, labeled 1-2-3-4-5. The Elliott Wave theory states that a three-wave correction follows every impulse. Unfortunately for traders relying on the downtrend to continue, this means a change EURNZD’s direction should soon occur.

The MACD indicator also supports the positive outlook. It shows a bullish divergence between waves 3 and 5 – a strong sign that the bears’ strength is diminishing. The pair recently breached the low of wave 3 and many breakout traders probably saw this as a reason to keep shorting the Euro against the New Zealand dollar. According to the analysis so far, that is a dangerous thing to do.

If this count is correct, EURNZD is in a high-risk reversal territory. It is too early to buy and too late to sell, so staying aside is the best thing to do right now. Once the U-turn actually occurs, 1.7000 is going to be within the bulls’ reach going forward.

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