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. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD: Portrays bearish set-up on D1 below 1.1900

EUR/USD edges lower around 1.1870 amid a quiet start to the week’s Asian session trading on Monday. The major currency pair snapped a four-day uptrend on Friday, posting the bearish spinning top candlestick.


GBP/USD: Bears brace for 200-SMA retest

GBP/USD begins the trading week on lower ground near 1.3900. The cable pair broke a short-term rising channel during the late Friday and teased bears amid a downward sloping Momentum line. The selling currently aims to retest the 200-SMA support near 1.3835, a break of which could highlight the 1.3770 area comprising multiple levels marked last week.


Gold bulls hesitate as focus shift to NFP

After closing the previous week in the negative territory, gold stayed on the back foot on Monday and dropped below $1,800. However, the subdued market action ahead of key macroeconomic events allowed the precious metal to stay in a consolidation phase on Tuesday.

Gold News

Shiba gets listed on eToro as demand for SHIB skyrockets

Leading investment platform eToro has been adding cryptocurrency assets on popular demand from users. The Dogecoin killer recently amassed 600,000 holders despite range-bound price action. 

Read more

Challenging week ahead

Three macro considerations are shaping the investment climate: the evolution of the virus and the response, the timeframe of the Fed's tapering, and China's broad regulatory crackdown. Beijing's new policy initiatives are broader and quicker than generally anticipated.

Read more