Technical Sentiment: Bearish
- EUR/NZD invalidated Higher Low swing configuration, turning bearish;
- Spot is currently trading below 200-SMA on 4H and Daily timeframes;
- 5700 might be in play within a few days.
Euro suffered a broad sell-off against a basket of currencies on Tuesday. Among other pairs, EUR/NZD tumbled below a 2-week range, signaling more losses in the near future.
While it’s still early in the day to make definitive conclusions, today’s euro weakness is likely to persist, leading into a much deeper sell-off as the long term downtrends take over the markets once again. EUR/NZD has been predominantly choppy for two weeks now, with price action stuck in a very narrow range between 1.6015 and 1.6200/50. From a technical perspective price, stayed on the bullish side during this period, above the 200 SMA on 4H and Daily, coupled with consistent higher swing lows.
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Consequently, today’s break is viewed as a strong bearish signal now that sellers are searching for a new lower low. While 200 SMA acts as resistance EUR/NZD is going to aim lower. 50-Dau and 100-Day are unlikely to represent huge resistance levels. Instead, we see 1.5700 as a huge attraction point, based on previous reactions which confirmed this level as a strong pivot zone.
Daily stochastic is heading towards oversold territory; however there’s still plenty of room for this move to develop even further. Bears should watch out for possible reversals back above 1.6000. Price stabilizing in this region could trigger a prolonged period of choppy behavior.
Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets