EUR/NZD is Still Trading Within a Range

EUR/NZD fell sharply last Tuesday, breaking below the 1.6850 barrier. However, since then the trading activity has been consolidative, slightly above the key support of 1.6690, which has been acting as the lower bound of the sideways range that’s been containing most of the price action since March 22^nd. The upper bound of that range is at around 1.7100. Overall, as long as the pair continues to trade within the range, we will hold a flat stance.

Having said that though, the fundamental outlook suggests that there is more chance for the pair to exit the range to the downside rather than to the upside. At its latest meeting, the ECB change its forward guidance to signal that interest rates are now likely to stay low for longer, while the RBNZ is expected to hit the hike button as soon as at the next gathering. Thus, this monetary policy divergence may add some extra pressure to this exchange rate.

A clear and decisive dip below 1.6690 would confirm a forthcoming lower low and may pave the way towards the 1.6485 barrier, which is marked as a support by the low of March 17^th. If the bears are not willing to stop there and manage to push the action lower, then we could experience declines towards the low of February 24^th, at 1.6320.

Taking a look at our daily oscillators, we see that the RSI lies below 50, but points sideways, while the MACD lies below both its zero and trigger lines. Both indicators detect downside speed, adding to our view that EUR/NZD could exit its recent range through its lower bound, but the fact that the RSI is flat supports the notion to wait for a confirmation break.

In order to turn our eyes to the upside, we would like to see a break above the upper bound of the aforementioned range, at 1.7100. This would confirm a forthcoming higher high on the daily chart and may see scope for advances towards the 1.7350 area, defined as a resistance by the highs of December 21^st and 22^nd, the break of which could extend the gains towards the 1.7550 barrier, near the high of November 6^th.

 

Disclaimer:

The content we produce does not constitute investment advice or investment recommendation (should not be considered as such) and does not in any way constitute an invitation to acquire any financial instrument or product. The Group of Companies of JFD, its affiliates, agents, directors, officers or employees are not liable for any damages that may be caused by individual comments or statements by JFD analysts and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his investment decisions. Accordingly, you should seek, if you consider appropriate, relevant independent professional advice on the investment considered. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with the legal requirements for financial analyses and must therefore be viewed by the reader as marketing information. JFD prohibits the duplication or publication without explicit approval.