EUR/NZD: Sellers Face Key Support at Triangle Pattern

Market Overview

On Wednesday, 27th November 2024, the New Zealand dollar rebounded from its multi-month low. This came after the Reserve Bank of New Zealand (RBNZ) cut interest rates by 50 basis points and indicated further rate cuts early next year, citing slowing domestic economic activity alongside easing inflationary pressures. Despite the rate cut, the market had already priced in much of the decision, resulting in a recovery for the NZD.

Technical Analysis

In the 4-hour chart of EUR/NZD, a descending triangle pattern is evident, indicating reduced volatility and a focus on a key support level. Price has made several attempts to break out of this pattern, but each time it was met with existing support and resistance levels. The descending triangle’s sloping nature points towards bearish market sentiment, and a valid breakdown could increase selling pressure.

The Kumo cloud is thinning, suggesting reduced volatility and the possibility of a market shift in the near future. Currently, the price is trading below the Kumo cloud, indicating that sellers have the upper hand, which could result in continued downward pressure. Additionally, both the Tenkan-sen (red line) and Kijun-sen (blue line) lie below the current price, further supporting the weak bullish trend and enhancing the likelihood of a decline.

At present, the price is nearing the support level at 1.78519. Should this support be broken, the next downside target would be 1.77438.

Momentum oscillators reflect an imbalanced market. The RSI is between 40 and 50, near the oversold zone, indicating prevailing selling pressure. The MACD also remains in the negative territory, with the signal line still below the MACD line, suggesting continued bearish momentum.

Conversely, if buyers manage to push the price above the resistance level at 1.80392, it could signal a market reversal. This would need to be confirmed by a breakout above resistance and a move beyond the Kumo cloud. Ultimately, the relationship between price and Ichimoku components implies that as long as the price remains below the Kumo cloud and resistance lines, the bearish trend will dominate. However, the thinning Kumo cloud may suggest an upcoming trend change, which must be confirmed with a solid breakout above resistance levels.

Key Levels

• Resistance Levels:
  • 1.80392 (Major Resistance)
• Support Levels:
  • 1.78519 (Current Key Support)
  • 1.77438 (Next Downside Target)

Key Events to Watch

On Wednesday, 27th November, one of the key events was the RBNZ’s rate cut, which lowered the rate to 4.25%. This rate cut was viewed as an easing signal from the central bank, although much of it was already priced in. Meanwhile, in the Eurozone, Germany’s GfK Consumer Climate index for December fell to -23.3, worse than the forecast of -18.8 and the previous -18.4 reading. This steep drop reflects heightened concerns among German consumers about the economic situation, which could add downward pressure on the euro. Additionally, a speech by Philip Lane, a member of the European Central Bank (ECB), may provide further clues about future monetary policies.

Conclusion

EUR/NZD is currently under pressure as it approaches key support within a descending triangle. Sellers remain in control, but thinning volatility in the Kumo cloud could hint at potential trend shifts, pending confirmation with significant resistance breaks.