EUR/NZD has bounced off its recent lows and broken to the upside of the foreign exchange trading consolidation pattern on its 4-hour time frame. However, the longer-term downtrend is still intact and this may be a correction from the previous declines.
The Fibonacci tool used on the latest swing high and low on the 4-hour foreign exchange trading time frame shows that the 50% Fibonacci retracement level lines up with the 1.5800 major psychological handle. This also lines up with a former support zone, which might now act as resistance.
Stochastic is indicating overbought conditions, which suggests that a selloff might happen soon. In that case, price might make its way back down to its previous lows at the 1.5400 levels. Shorting at 1.5800 with a stop above the 61.8% Fib or the 1.5900 mark and a target of 1.5400 could yield a 4:1 return on risk.
Foreign Exchange Trading Signal
This week, the euro zone released stronger than expected manufacturing and services PMI from Germany and France. The figures showed improvement, except for the flash manufacturing PMI from France, yet the overall euro zone figures ticked higher. Today, Germany will release its GfK consumer sentiment reading and IFO business climate report.
For now, the Kiwi is being weighed down by traders liquidating their long positions, after the RBNZ mentioned that they will pause from their rate hikes to assess the impact of their latest tightening moves on the economy. In addition, Governor Graeme Wheeler attempted to push the currency lower in saying that Kiwi exchange rates are not justified by fundamentals and that these are unsustainable.
However, the attraction of positive carry could soon lure traders back to establishing their long NZD foreign exchange trading positions, especially against lower-yielding currencies like the euro. Recall that the ECB recently slashed several interest rates in last month’s rate statement in order to spur lending and spending in the economy.
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