EUR/NZD bears are waiting to pounce again ahead of ECB

• EUR/NZD is one for the watchlist as traders get set for the ECB. 
• Considering the RBNZ, a break of market structure and a dovish ECB outcome would be bearish. 

At the time of writing, EUR/NZD is trading at 1.6923 and down some 0.54% on the day after falling from a high of 1.7056 to a low of 1.6911.

This was a move forecasted in yesterday's price analysis, EUR/NZD Price Analysis: Bears breaking key 1.7016 hourly support, (more on that below). 

Meanwhile, the Kiwi raced higher as the greenback gave back gains. 

Broad risk appetite returned sending US yields on a tear and another rally in equities, building on the prior day's correction following the start of the week's blood bath.

By the close of New York trading, the dollar index, a measure of its value against six major currencies was lower at 92.758, DXY.

On Tuesday, the index hit a more than three-month high.

''Price action across many risk markets was highly correlated and there wasn’t anything NZ-specific in the mix, but the NZD was a general outperformer, gaining on most crosses,'' analysts at ANZ bank explained.  

A void of hard domestic data for the next 24 hours will leave the focus on the ECB which should help to clarify the ECB’s new inflation target.

However, this morning Stats NZ will release New Zealand’s first quarterly income GDP measure, an experimental measure that will offer some guidance to traders as to how the economy is performing.

However, the more important event will be the conclusion of the ECB strategic review which probably means the distribution of probabilities is skewed to lower EUR/USD.

Markets are expecting a more dovish bias and that would imply a total reduction of the monthly purchases in 2022.

Such an outcome would be less than previously expected and would be expected to weigh on the single currency. 

With the Reserve Bank of New Zealand expected to start a tightening cycle in August, the opening up of a material gap between the RBNZ and ECB is likely to weigh on the cross. 

EUR/NZD technical analysis

As per yesterday's analysis, EUR/NZD Price Analysis: Bears breaking key 1.7016 hourly support, while the price did not deteriorate on the first attempt and restest of structure, it certainly did on the next as European traders piled in:

Prior analysis, EUR/NZD 1-hour chart

''As illustrated, the bears are pressing against the hourly support of 1.7016. 

A close below there will be bearish and should shift the time frame into a bearish environment.

This could offer an optimal entry point from which bears can target a full-on break below 1.70 the figure and then test the 1.6980s and 1.6950s below there.''

Live market analysis

As illustrated, entry 1 was risky as the environment was not yet bearish according to MACD.

Nevertheless, a sell limit at 1.7016 and subsequent position should have been protected with a stop loss, nevertheless, above the prior highs and resistance, allowing for some upside. 

Entry was a higher probability entry considering the environment was bearish according to MACD. 

Looking ahead, depending on the outcome of the ECB, traders will want to see the daily chart's support broken before betting on more downside:

The support is reinforced by the 61.8% Fibonacci retracement level. 

This cross is one for the watch list for sessions ahead, but there is little opportunity ahead of the ECB according to the current market structure.