EUR/NZD hits the top of the watchlist as recent consolidation could be broken soon with the latest monetary policy statement from the RBNZ on Wednesday.
EUR/NZD Wedge Breakout?
Right around the corner, we’ve got the latest monetary policy decision coming from the Reserve Bank of New Zealand. Traders are pretty confident that we won’t see any changes to interest rates, but what’s uncertain is whether or not the RBNZ will lean hawkish or dovish.
Arguments can be made for optimistic rhetoric on the recovery narrative, but recent economic updates have been somewhat net disappointing (e.g., ANZ consumer confidence slumped from -4.1 to -8.4, ANZ business confidence index down from 0.0 to -4.1, New Zealand economy contracts in Q4).
Odds are that we’re not going to see hints of a rate hike anytime soon, which is likely why we’ve see a bearish lean on the Kiwi in April. We think that with covid recovery uncertainty rising as the pandemic is still very much raging (WHO says Covid pandemic is growing ‘exponentially’ at more than 4.4 million new cases a week), bearish comments from the RBNZ will likely bring on more Kiwi selling.
If that scenario plays out, the rising wedge in EUR/NZD is one to watch for an upside break. This area was a previous swing high back in March, and if broken, we could see more buyers hop into the technical setup.
Now, if we see the RBNZ lean hawkish (i.e., optimistic on growth / potential raising for interest rates), that would be a big surprise to forex traders. This scenario would likely spark a very bullish short-term run in the Kiwi, making the rising wedge pattern on EUR/NZD one to watch for a downside break.
If so, look for traders to take the pair back below the 1.6900 easily, possibly as low as the 1.6850 area given the daily ATR of around 110 pips.
So, what do you all think? Are you watching EUR/NZD for a solid consolidation break? Let me know in the comments section below!
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