EURNZD has broken below the neckline of its head and shoulders pattern visible on the daily time frame, indicating that a downtrend might follow. This could last by around 500 pips or the same height as the chart formation.
The 100 SMA is still above the longer-term 200 SMA to indicate that the path of least resistance is to the upside. In other words, there’s still a chance for the uptrend to resume. Then again, EURNZD has fallen below both moving averages to signal a pickup in bearish pressure.
RSI is heading down but is dipping into the oversold region to signal exhaustion. Turning back up could mean that buyers are ready to return and push price back up to nearby resistance levels. Stochastic is also in the oversold region to show that sellers are tired enough to let buyers take over.
The euro is on weaker footing these days as the ECB minutes turned out more dovish than expected. Only medium-tier reports are due from the region this week, but traders are likely to pay close attention to the results to get more clues on whether or not the central bank could start easing again.
Meanwhile, the Kiwi drew some support as the quarterly CPI came in line with expectations of a 0.6% gain, stronger than the earlier 0.1% uptick. This could be enough to convince the RBNZ to sit on their hands for the upcoming rate statement instead of cutting by 0.25% again.
Apart from that, improving risk sentiment on account of easing trade tensions and a dovish Fed outlook is also bullish for the higher-yielding Kiwi. After all, the prospect of lower borrowing costs could boost business outlook and demand for commodities, which is good for New Zealand’s export-driven economy.