Will this short-term rally in EUR/NZD potentially about hit a wall of sellers soon? Check out the technical picture and potential catalysts ahead.
Intermarket Snapshot
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Fresh Market Headlines & Economic data:
- Oil hits 4-month highs, Brent reaches $68 on tighter supply
- China and US to reportedly push back Trump-Xi meeting to at least April
- U.S. import prices post largest gain in nine months
- U.S. weekly jobless claims increase more than expected
- China industrial output growth falls to 17-year low, more support steps expected
- Road, Railway Spending Boosts China’s Fixed-Asset Investment
- UK house price growth weakest since 2011 as Brexit nears – RICS
- PM to bring third Brexit deal vote to Commons
- Compared with January 2019, Germany’s consumer price index rose by 0.4% in February 2019
- In February 2019, French consumer prices were stable over one month and rose by 1.3% year on year
- Canadian new housing prices fell in January for the first time since February 2018
- Swiss producer and import price index increased in February 2019 by 0.2% compared with the previous month, reaching 101.9 points
Upcoming Potential Catalysts on the Forex Calendar:
- EIA natural gas storage data at 2:30 pm GMT
- U.K. Parliament votes on Brexit extension (tentative)
- New Zealand manufacturing index at 9:30 pm GMT
- New Zealand international travel and migration at 9:45 pm GMT
- Bank of Japan monetary policy statement (tentative)
What to Watch: EUR/NZD
The potential catalysts of the Brexit extension vote and the upcoming Bank of Japan monetary policy decision is probably a little too big to take a short-term trade on for us, and with little else to potentially move the markets ahead for Thursday, this EUR/NZD is a clean setup to add to the watchlist.
On the one hour chart above, we can see the pair popped higher over the last sessions, now about test the broken minor support area that held in early March around the 1.6620 level. Stochastic is already showing potentially overbought conditions and turning lower, and this area also lines up with the 61.8% Fib retracement area from the 1.6726 to 1.6406 down swing move. So, sellers are likely eyeing this area for technical reasons.
If you’re bearish, watching this area for a potential short makes sense, but you should probably wait for the upcoming NZ manufacturing index data just after the Thursday U.S. session closes. If that comes out positive and we see reversal patterns back to the downside, the odds are pretty good sellers could jump in. And with the previous swing low well beyond the daily ATR of 60 pips at 1.6406, the potential R:R is pretty attractive.
For the bulls, if you do see a break higher, the potential R:R isn’t as attractive with the next resistance area around 1.6700, but it still might be enough to be worth the risk, especially if we see a big disappointment with the manufacturing sentiment survey.