The EUR/NZD pair appears to have finished its uptrend, as the pair is forming a reversal pattern on the 4-hour time frame.
Will we see confirmation soon?
EUR/NZD currency pair on the 4-hour chart Chart by TradingView
After two failed attempts to break the resistance at the key psychological level of 1.8500, the EUR/NZD pair is now testing the neckline support around 1.8100.
A drop below this area may be enough to confirm that a downtrend is in order, which could lead the pair to drop by the same height as the chart pattern or closer to 400 pips.
But will the situation collapse soon?
Remember that directional biases and volatility in market prices are usually driven by fundamentals. If you haven’t done your homework on the EUR and NZD yet, it’s time to take a look at the economic calendar and stay up to date with the daily fundamental news!
Earlier this week, New Zealand posted much stronger-than-expected jobs figures, throwing cold water on expectations of a near-term interest rate cut by the Reserve Bank of New Zealand. New Zealand is due to release its quarterly inflation outlook report in a few days, so an upbeat result could be enough to spark another rally in the NZD.
Be prepared for a possible drop to the next support area at S2 (1.7900) slightly below the dynamic inflection point of the 200 SMA if this happens.
There was little on the eurozone agenda this week, leaving the common currency mostly acting as a counter-currency. However, long-term flows should be watched, which could eventually favour the low-yielding euro against the New Zealand dollar.
If the neckline support around S1 (1.8110) holds, look for a bounce to nearby resistance areas at the pivot point level (1.8280) and then tops near R1 (1.8490). Note that the 100 SMA is still above the 200 SMA to reflect bullish pressure.
Whichever way you decide to play with this setup, make sure to practice proper risk management techniques and stay up to date with the major market catalysts that are lining up!