EURNZD has been trending lower on its 4-hour time frame, moving inside a descending channel formation. Price just bounced off the bottom of the range and might be due for a test of the resistance.
The 100 SMA is starting to cross below the 200 SMA, signaling a potential return in selling pressure. These moving averages line up with the top of the channel around 1.6500, which might keep gains in check.
In addition, using the Fib tool on the latest swing high and low shows that the 61.8% level is also in line with the top of the channel. This might be the line in the sand for any correction, as a break past the 1.6500 area could indicate a reversal form the downtrend.
Stochastic is on the move up so buyers are in control for now, likely with enough energy to take the pair up for a test of channel resistance. RSI is starting to turn lower, suggesting a return in selling momentum even though it hasn’t indicated overbought conditions yet.
Event risks for this setup include the RBNZ decision later on in the week, as the central bank might keep rates unchanged given the recent improvements in the New Zealand economy. The lack of any action could be bullish for the Kiwi, as this would show that concerns from previous months have dissipated.
On the other hand, dovish remarks or an actual rate cut could spur a rally past the channel resistance, creating a longer-term climb for EURNZD. There are no major releases from the euro zone but the ECB’s latest policy statement has sounded downbeat and the potential Brexit is also dragging the shared currency lower.
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