EUR/NZD has suffered a sharp selloff in the past few days after the ECB decided to implement negative deposit rates and cut their actual benchmark rate. On the other hand, the New Zealand dollar has drawn a lot of support from the RBNZ interest rate hike, offering a large positive interest rate differential between the euro and the Kiwi.
Price seems to have found a bottom near the 1.5550 area for now though, with the pair gearing up for a corrective wave pattern. The retracement might last until the 38.2% Fibonacci level, which lines up with a former support area and the 1.5800 major psychological level.
EUR/NZD Price Forecast
A pullback to that area could lead to a resumption of the selloff back to the previous lows at 1.5550 or lower. This depends on whether or not euro zone data continues to disappoint and suggests that the ECB could make further easing actions. This could also depend on how dairy prices in New Zealand fare, as these have been the culprit for the commodity currency’s selloff in the past weeks.
On the other hand, a rally past the 1.5800 area could mean that the selloff isn’t likely to resume. A break beyond the Fib levels would confirm that further gains are in the cards for EUR/NZD.
If selling momentum is extremely strong until the next week though, EUR/NZD simply might make a sharp break below its previous lows and head all the way down to the next visible support zone at 1.5100. This could be spurred by traders adding to their short euro positions, as they take advantage of the positive carry in holding to this short EUR/NZD position for the longer-run.
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