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Can an improvement in German economic sentiment lift the euro’s spirits today?

Or will risk-taking keep lifting the Kiwi after China’s upbeat GDP?

I’m looking at this potential reversal on EUR/NZD!

Before moving on, ICYMI, yesterday’s watchlist looked at a pullback setup on USD/JPY ahead of the BOJ decision this week. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

Chinese GDP rose by 2.9% q/y in Q4 2022 vs. 1.6% forecast

Chinese Dec fixed asset investment up 5.1% ytd/y vs. 5.0% consensus

China’s Dec industrial production up by 1.3% y/y vs. 0.2% forecast, 2.2% previous

Chinese Dec retail sales down only 1.8% y/y vs. estimated 9.5% slump

Japanese tertiary industry activity down by 0.2% m/m vs. projected 0.2% uptick

BOJ intervened in gov’t bond market by buying 10-yr JGBs

U.K. claimant count change at 19.7K in Dec vs. 19.8K forecast, 30.5K previous

U.K. average earnings index up from 6.1% to 6.4% in three-month period ending in Nov

Upcoming Potential Catalysts on the Forex Economic Calendar:

German ZEW economic sentiment index at 10:00 am GMT
Canadian CPI reports at 1:30 pm GMT
U.S. Empire State manufacturing index at 1:30 pm GMT
BOJ monetary policy decision (Jan. 18)

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

What to Watch: EUR/NZD

EUR/NZD 1-hour Forex Chart

EUR/NZD 1-hour Forex Chart by TradingView

Steering clear of yen volatility while still hoping to trade the news today?

Here’s a simple euro setup I’ve got on my radar.

You see, EUR/NZD already busted through the top of a short-term descending channel, hinting that a reversal from the selloff is due.

The pair is currently pulling back to the broken channel top, which happens to be right smack in line with the 38.2% Fibonacci retracement level.

If this holds as support, we might just see a rally back to the swing high at 1.7037 and beyond!

Note that this area of interest is right around the 200 SMA dynamic support, which adds to its strength as a floor. The 100 SMA is above the 200 SMA to confirm that the uptrend is likely to gain traction from here.

However, Stochastic still has a bit of room to move lower before reaching the oversold region to indicate that sellers are allowing buyers to take over.

With that, a larger pullback could still reach the 50% level near the 1.6850 mark or the 61.8% Fib close to the 1.6800 major psychological level.

I’m keeping an eye out for the results of the ZEW economic sentiment reports, which are expected to show improvements for Germany and the entire euro region.

Just be careful since riskier currencies like the Kiwi might still be enjoying strong demand thanks to China’s upbeat GDP data released earlier today.