EURNZD - Waiting for the retracement

Today's RBNZ Wheeler expressed concerns of the appreciating Kiwi Dollar. Against most of the pairs, the NZD has been weakening. The EURNZD offers a good trade, besides the fact that EURNZD shorts also attract positive overnight swaps.

The chart below depicts the trade idea. It might seem a bit confusing but its quite simple. Just follow the explanations based on the markers.

EURNZD - Renko Chart, Trade Idea

1. A triangle pattern is formed which was validated by a downside break out. The triangle gives a target to 1.5229. The break out failure is to be seen as a retracement that usually happens to all break outs.

2. I plotted a mini AML and the retracement looks to end at 1.6278. Typically prices tend to deviate after hitting the median line (and not to forget that prices hit the median line 80% of the time).

The level of 1.6278 sits right between the 50 - 38.2% retracements of the major leg down and the minor leg down. This gives us a reversal range between 1.6488 & 1.62324 and 1.6278 sits right in between these two levels, which if you look to the left has formed interim support during past rally and looks set to act as resistance to this short term rally.

3. The very light AML gives the long term picture. Price failed to reach the median line indicating a change of trend.

Putting it together, we can take a short positioon at 1.6278 targeting 1.5229. For stops, above the break of the trendline from the major AML at 1.6698 gives a total RR trade of 2.5, with the potential to make 350 Pips.