Remember that EUR/NZD triangle breakdown setup I showed y’all a couple of weeks ago? Well, it looks like I’m seeing that forex correction I’ve been waiting for!
As you can see from the 1-hour forex chart below, the pair followed through with enough downside momentum after making its triangle support breakout, hitting lows near the 1.6850 minor psychological support. From there, price started to pull back, possibly retracing until the Fib levels.
The 50% Fibonacci retracement is closer to the broken support area around the 1.7350 minor psychological level, which might keep further gains in check and push the pair back towards its previous lows or much lower. Stochastic is already near the overbought zone, which suggests that buying pressure might fade soon, allowing euro bears to take the lead.
In terms of fundamentals, it seems that RBNZ Governor Wheeler’s latest comments suggesting that “some further easing is possible” is currently weighing on the Kiwi, along with China’s bleak import figures printed yesterday. However, the impressive rebound in New Zealand’s dairy industry, spurred mostly by the removal of the Russian ban on the country’s milk shipments, could keep the economy and currency supported.
As for the euro, the region’s final CPI readings due later this week could have a strong impact on its forex price action, especially since the initial estimates indicated deflation. While some ECB officials have been trying to downplay the likelihood of further easing, the latest set of reports from the euro zone’s top economies suggest that the recovery is losing traction.
Other potential catalysts for this forex trade setup include the release of New Zealand’s quarterly CPI readings on Friday and the Chinese data dump early next week. For now, I’m keeping my eyes locked on the potential entry area around 1.7350-1.7400 to see if I can hop in once economic data confirms my short bias.
What do you guys think of this forex trade setup? As always, I’d love to get your feedback on my ideas!
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