Don’t look now, but EUR/NZD is nearing another test of its ascending channel that’s been holding for almost an entire year! Here’s where I plan on entering.
Long EUR/NZD Idea
From a technical standpoint, this looks like a very neat play, with stochastic approaching oversold levels and price closing in on the channel support around the 1.7000 major psychological level.
If it holds as a floor once more, the pair could make its way back up to the channel resistance near 1.7700 or at least until the mid-channel area of interest at 1.7300. Simple enough, right?
But here’s where it gets a bit more complicated. Fundamentals appear to favoring more losses for the shared currency while Germany struggles to hammer out a coalition. As for the Kiwi, the newly-crowned RBNZ head Adrian Orr is seen to be a hawkish option, so the central bank could also be due to switch its stance soon.
Still, euro zone fundamentals are looking much better compared to that of New Zealand, barring a few medium-tier misses from the past couple of weeks. Leading indicators from its top economies hint at stronger demand and business activity down the line while inflation has ticked higher.
The main event risk for the euro this week is the ECB decision and Draghi’s upcoming speech could provide some clues on how the announcement might turn out.
With that, I’m sitting on my hands for the time being and waiting to see if Draghi is in a good mood this week. I’m eyeing an entry closer to the 1.7000 mark and will set a wide stop below the 1.6700 area of interest if I’m able to hop in.
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