Will Traders Recognize EUR/NZD Breakout?

After trading sideways for several months, the Euro is showing signs of life versus the New Zealand Dollar. On Thursday, the EUR NZD crossed the March 22 high at 1.6396, triggering a mild breakout to the upside. If traders can recognize this move then volume and volatility should increase, putting this currency on a path to reach an upside target on May 21.

Besides the breakout to the upside, the EUR NZD has also crossed to the bullish side of an uptrending Gann angle at 1.6414 today. Walking along this angle over the next two weeks will take this market to 1.6854. A downtrending resistance angle from the November 22 top at 1.8132 comes in at 1.6842 on May 21. Finally, the main range is 1.8132 to 1.5588. The 50 percent level of this range is at 1.6860.

The combination of the Gann angles and the retracement level creates a price target and potential resistance cluster at 1.6842 to 1.6860 on May 21. The best way to play for this move is to watch how the market reacts to the uptrending Gann angle. This angle should act as a guide and may not necessarily be support all the time.

Despite the weakness in the Euro against the U.S. Dollar this week, the Euro has held its ground against the New Zealand Dollar. Fundamentally, the New Zealand Dollar broke sharply after a report showed the country’s jobless rate unexpectedly rose. This report may lead the Reserve Bank of New Zealand to ease monetary policy. This led traders to increase the probability of a rate reduction by September to more than 60 percent from less than 50 percent according to Bloomberg.

On Thursday, the European Central Bank left its benchmark interest rate unchanged and offered no hints as to whether it is even considering further cuts. Since the RBNZ may lower its key interest rate in the future, the interest rate differential favors the Euro.