EUR/NZD traded lower during the European morning Monday, breaking below the key support (now turned into resistance) barrier of 1.7050. The pair has been in a sliding mode since Friday, when it hit resistance near the 1.7150 barrier. Today’s break confirmed a forthcoming lower low and turned the short-term bias to the downside in our view.
If the bears are willing to stay in the driver’s seat, then we may see them driving the battle lower, perhaps targeting the 1.6980 zone, which lies slightly below the 200-EMA and is defined by the low of May 10th. The bears may decide to take a break after challenging that zone, that way allowing the rate to rebound somewhat. However, if they decide to jump back into the action from below the 1.7050 hurdle, they could decide to retake the 1.6980 area, the break of which may allow them to push for our next support, at around 1.6935.
Looking at our short-term oscillators, we see that the RSI is below 50 and points south, while the MACD lies below both its zero and trigger lines, pointing down as well. These indicators detect negative momentum and support the notion for some further near-term declines in this exchange rate.
In order to abandon the bearish case, we would like to see a decisive recovery back above 1.7150. This would also bring the rate above the tentative downside resistance line drawn from the high of May 23rd, and could allow a test near that peak, at around 1.7200. Nevertheless, in our view, a break above that hurdle is needed before the outlook switches to positive again. Such a break would confirm a forthcoming higher high on both the 4-hour and daily charts and may set the stage for extensions towards the 1.7260 area, defined by the inside swing low of October 31st.
