EURNZD is currently trading at 1.94672, showing signs of consolidation after testing a key horizontal support level. Recent price action reveals that the pair has been trading within a range-bound pattern following a sharp decline from previous highs.

Price seems to be forming a head and shoulders reversal pattern on its short-term time frame, suggesting a possible downtrend as the neckline support is being tested. A break below this could set off a drop that’s the same height as the chart formation.

The pair experienced a significant drop on April 9th, breaking below both moving averages. However, buyers stepped in at the horizontal support around 1.9400, leading to a bounce. Since then, EURNZD has established a consolidation pattern, hovering between the horizontal support and resistance formed by the 100 MA.

Stochastic is currently rising from the oversold territory, suggesting potential upward momentum developing while MACD is showing early signs of bullish divergence with histogram bars beginning to increase in height, though still below the zero line.

As with most major currencies, EUR and NZD could take cues from overall market sentiment resulting from trade tensions, particularly tariffs from the US and reciprocal measures from trade partners.  There have been signs of a compromise for the likes of Vietnam and the EU recently, suggesting that tensions could still subside at some point.

Note that the ECB decision is lined up this week and policymakers have been talking of the possibility of another interest rate cut to account for trade uncertainty and the potential blow on the region’s economy. In that case, a more cautious outlook or a preemptive easing measure could bring more downside for the shared currency.

Still, risk-off flows could also prove bearish for the Kiwi, especially as trade tensions between the US and China continue to sour.