EURNZD is moving sideways in a rectangle forex wave pattern on its 4-hour chart, as price is testing the top of the range. Price has been bouncing off support at the 1.5720 area and resistance at the 1.5850 minor psychological level.
If this forex wave pattern resistance holds, EURNZD could make its way back to the bottom of the range for a 130-pip drop. Stochastic has reached the overbought zone, indicating that a selloff market might take place and push the pair back to the bottom of the range.
Forex Wave Pattern Outcomes
Another test of the forex wave pattern support could lead to a rally back to the top of the range, as market factors push the euro and the Kiwi around. Both currencies seem to have a bearish bias for now, as the prospects of further easing from the ECB and weaker trade activity from New Zealand are likely.
For the ECB, Governor Mario Draghi’s recent testimony at the Jackson Hole conference indicated that the central bank is open to further easing, even after they already cut several interest rates back in June. Weaker economic performance is expected, as the impact of Russia’s food import sanctions on Europe could weigh on production and trade.
As for New Zealand, their recent trade balance turned out to be a huge disappointment as it registered a 692 million NZD deficit. This was spurred by an 11.5% drop in exports, mostly resulting from a decline in pine log shipments to China. The recent decline in dairy prices could weigh on milk product shipments later on, as investors continue to forecast weaker prices in the coming months.
With that, EURNZD might stay stuck inside this rectangle forex wave pattern for the time being, as traders try to figure out which currency fundamentally weaker.
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