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We’ve got both bullish and bearish opportunities on EUR/NZD to be on the lookout for as the currency pair picks up in volatility after the latest business sentiment data from Europe and the latest RBNZ statement.

Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/NZD after the latest RBNZ statement and ahead of UK PMI data, so be sure to check that out to see if there is still a potential play!

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Fresh Market Headlines & Economic Data:

IHS Markit Flash U.S. Composite PMI: Solid rise in private sector business activity in September

FHFA House Price Index Up 1.0 Percent in July; Up 6.5 Percent from Last Year

Fed’s Clarida Says Months of 2% Inflation Needed for Liftoff

Fed’s Mester says more stimulus needed to support fragile recovery

Flash Eurozone Manufacturing PMI at 53.7 (51.7 in August).

ECB Must Limit Emergency Powers to Temporary Crises, Mersch Says

UK recovery loses momentum in September and business outlook
drops to its weakest since May

UK confident on overcoming difficulties to get EU deal: Gove

Irish PM says EU-UK trade deal can be reached

Upcoming Potential Catalysts on the Economic Calendar

Fed Quarles speech at 6:00 pm GMT
Canada Prime Minister Trudeau statement at 10:30 pm GMT
Bank of Japan Monetary Policy Meeting Minutes at 11:50 pm GMT
Bank of Japan Core CPI at 1:00 am GMT (Sept. 24)
Swiss National Bank Monetary Policy statement at 3:30 am GMT (Sept. 24)

What to Watch: EUR/NZD

EUR/NZD 1-Hour Forex Chart
EUR/NZD 1-Hour Forex Chart

While we do have a couple of central bank events ahead from the SNB and BOJ, they’re not usually market movers.

So today, we’re watching EUR/NZD as volatility has picked up in the pair thanks to the latest Reserve Bank of New Zealand monetary policy statement (New Zealand central bank holds rates but hints at further easing) and the latest business sentiment updates from Europe (Euro zone Sept business growth halts as services reverse).

The market has moved higher on NZD weakness, but with a net weak business sentiment update from Europe, we could see choppy/volatile behavior from EUR/NZD short-term, making the previous levels of support and resistance ones to watch.

For the bulls, the pair broke above a strong level of interest, the 1.7680 handle that served as both support and resistance in September.

A fall back down to that level within the next session or two could draw in NZD bears, especially if Stochastic moves back into oversold territory and if broad risk sentiment remains negative.

With a daily ATR of around 130 pips, taking a long position in that area gives a rough 1:1 potential return-on-risk if targeting the strong resistance area around the 1.7800 major psychological level.

For the bears on the pair, a retest of that 1.7800 major psychological level may bring out short-term bears on the euro and/or technical traders looking to play the high probability resistance area. This especially makes sense if broad risk sentiment flips back to positive, which usually tends to favor the Kiwi over the euro.

Swing traders may already be checking out this area for a potential short play given the solid run higher the pair has made over the past three trading sessions, a move that looks overdone as it nears a full weekly ATR (360 pips) move.