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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!

Equity Markets Bond Yields Commodities & Crypto
DAX: 13286.56 +1.22%
FTSE: 6412.67 +1.24%
S&P 500: 3619.17 +1.16%
NASDAQ: 11964.38 +0.70%
US 10-YR: 0.875% +0.016
Bund 10-YR: -0.57% +0.008
UK 10-YR: 0.325% +0.006
JPN 10-YR: +0.031% +0.014
Oil: 44.86 +4.18%
Gold: 1,801.70 -1.96%
Bitcoin: 19,378.75 +6.21%
Ethereum: 606.89 +4.84%

Fresh Market Headlines & Economic Data:

Bitcoin climbs past $19,000 and closes in on record price

Dow rises for a second day, gains 350 points as Trump administration begins transition

S&P Corelogic Case-Shiller Index Shows Annual Home Price Gains Soared To 7% In September

U.S. House Prices Rise 3.1 Percent in Third Quarter; Up 7.8 Percent over the Last Year

Richmond Fed Manufacturing Index fell from 29 in October to 15 in November

European shares rise on possible easing of COVID-19 curbs, vaccine progress

German GDP rose by 8.5% in the third quarter of 2020 compared with the second quarter of 2020

Ifo institute expects German economy to shrink in fourth quarter

No-deal Brexit would be worse for the UK economy than Covid-19, says Bank of England governor

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

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

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.