EURNZD can’t seem to pick a clear direction for now, as price consolidated tightly inside a symmentrical triangle pattern on its 4-hour time frame. The pair might find resistance at the top of the triangle around the 1.5950 minor psychological mark and support at the bottom around 1.5900.
An FX breakout to the upside could mean around 300 pips in gains, which is the same height as the chart pattern. This could push EURNZD to the 1.6250 minor psychological resistance, which has held as a ceiling so far this year. Similarly, a downside break could mean around 300 pips in losses, which could lead EURNZD down to the 1.5600 major psychological support zone.
FX Breakout Scenarios
Fundamentals suggest a downside bias for this forex pair, as the ECB is mulling further easing measures in order to stoke inflation in the euro zone. The New Zealand dollar is being weighed down by another decline in dairy prices, which could lead to cut in milk payouts from Fonterra to farmers and suppliers.
The upcoming ECB interest rate decision could be the main catalyst for an FX breakout in either direction, as the announcement of actual easing could lead to more losses for the shared currency. Inflation figures from the region have been far from impressive, as the headline CPI recently marked another downtick while the core CPI stayed steady at 0.7%.
On the other hand, if Draghi refrains from announcing any monetary policy changes for now and decides to wait for the impact of their recent easing efforts, EURNZD could make an FX breakout to the upside on a relief rally. In his latest testimony, the ECB head emphasized that they would do whatever they can to ward off deflation in the region.
Either way, EURNZD could be in for a lot of volatility in today’s London trading session and fakeouts might take place before the pair heads in a particular direction.
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