While the kiwi has been showing strength relative to multiple currencies of late, I believe two particular NZD pairs are worth further scrutinization as they appear primed for strong directional moves over the next few days and weeks – EUR/NZD and AUD/NZD. That said, the technical backdrop has been rather different for these two pairs since the beginning of August.
For EUR/NZD, the pair began to correct its rather steep decline (approximately 2000 pips) from the beginning of May, whereas AUD/NZD put in its final top above the key psychological 1.30 level and has proceeded nearly directly lower since. A key piece of data is due out of New Zealand within the next few minutes: 3Q Consumer Prices (Bloomberg consensus is for this to increase to 0.5% QoQ from 0.3% in Q2). Also, keep an eye on the RBA’s October meeting minutes later tonight as a confirmation of the more recent dovish stance could continue to weigh on the aussie.
EUR/NZD technical outlook (Exhibit 1):
- Continues to see a daily RSI bearish divergence with price
- Held the 50% retracement (8.06) twice
- Failed numerous times into the 144 & 169-day EMA’s while 13-day sma is below (bearish)
- Found resistance yet again into the 200-day sma
- While daily RSI bounced off the key 40 level, it recently failed into the critical 65 level – This suggests we’re in the EARLY stages of a potential downtrend
- Prior low and bottom of the daily Ichimoku Cloud around 1.5470/75
- Broke below Head and Shoulder neckline in late-September
- Appears to be failing upon retest of neckline around 1.2560/80
- Prior 2012 lows between 1.2525/55 are also providing resistance
- Long-term Head and Shoulder measured move objective is around
Chart Source:Forex Charts by eSignal
Exhibit 2:
Chart Source:Forex Charts by eSignal
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