EUR/NZD bears have been in steady control this week, but will the downtrend continue with catalysts from New Zealand ahead?
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on NZD/JPY for a potential uptrend pullback, 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:
Upcoming Potential Catalysts on the Economic Calendar
RBNZ Financial Stability Report at 8:00 pm GMT
API Crude oil stock change at 9:30 pm GMT
Japan Services PPI at 11:50 pm GMT
Australia Construction Work done at 12:30 am GMT (Nov. 25)
RBNZ Governor Orr speech at 2:00 am GMT (Nov. 25)
Bank of Japan Core CPI at 5:00 am GMT (Nov. 25)
What to Watch: EUR/NZD
On the one hour chart above of EUR/NZD, we can see that sellers have been in constant control this past week. Disappointing Euro area outlook updates (including today’s German Ifo update) and positive New Zealand updates (NZ retail sales recovers) have likely been the catalysts for this move, enough to break the pair below a previous support area around 1.7050. Will this fresh break draw in more sellers ahead?
It’s possibly technical traders could see this as another selling signal, and as far as fundamental traders, any positive rhetoric from the upcoming RBNZ Financial Stability report and/or comments from RBNZ Governor on the report could spark more buying interest in the Kiwi dollar.
So, look out for that scenario to play out, as well as continue broad positive global risk sentiment, before considering a short. Or for the more aggressive forex traders out there, scaling into a short position makes sense to limit risk ahead of event catalysts like central bank speak.
For the bulls on EUR/NZD, it would likely take very dovish comments from the RBNZ (e.g., hinting at another round of QE, moving towards negative interest rates) to shift the trend, and/or a big shift in global risk sentiment towards negative. At the moment though, with vaccine news coming out as positive and signs of potential lockdown easing, the odds are pretty low of that scenario developing.
However, if that scenario does play out, look for a break above the falling ‘highs’ before considering a long position for a potential short-term to swing trade.