EURNZD Looking Bearish
May 05 2020
EURNZD made a big, overlapping drop but still in five waves from 1.993 high, thus suggesting that trend is changing to bearish, for a minimum three-wave larger move. We see a completed Elliott wave leading diagonal in wave A)/1) at 1.765 level, from where price started rallying on lower degree time frames. Ideally an A-B-C correction of wave B)/2) is underway now, and can face first potential resistance and reversal later around 1.85 level (Fib. ratio of 38.2). But because price unfolded an Elliott wave leading diagonal in the first leg, the correction can be deeper, and price can reach even the 1.914 level (Fib. ratio of 61.8) before bears takes over. In any case, further weakness for a third wave of a decline will be expected once current correction fully develops.
At the same time it's good to highlight that New Zealand has been fight coronavirus quite well compare to some other countries, so economy may pick up faster than maybe in some other regions, Europe per example. The employment figures will be very important in upcoming months, and we think that they can be better compared to EU so EURNZD may see weakness, but ideally from higher/better resistance price.
When diagonal triangles occur in the fifth or C wave position, they take the 3-3-3-3-3 shape that Elliott described. However, it has recently come to light that a variation on this pattern occasionally appears in the first wave position of impulses and in the A wave position of zigzags. The characteristic overlapping of waves one and four and the convergence of boundary lines into a wedge shape remain as in the ending diagonal triangle. However, the subdivisions are different, tracing out a 5-3-5-3-5 pattern. These diagonal triangles are called leading diagonals.
An example of an Elliott wave leading diagonal:
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