EURNZD recently surged past the resistance around the 1.6800 major psychological level then zoomed up to a high of 1.7100. From there, the pair made a pullback to the broken resistance, which lines up with the 38.2% Fibonacci retracement level on the 4-hour chart.
At the same time, stochastic is indicating oversold conditions, suggesting that a bounce might take place. RSI is also showing that the selloff is overdone, which means that the area of interest might now hold as support. If so, the pair could climb back to the previous highs and beyond.
For now, the 100 SMA is safely above the 200 SMA so the uptrend can carry on. In addition, the 100 SMA lines up with the 50% Fib, which might hold as support in a larger pullback. However, a break below the 61.8% level and 200 SMA might be an early signal that a reversal is taking place.
The euro could stage a rally now that Greece is just a few steps away from receiving its bailout package and meeting its loan obligation to the ECB on Thursday. If the IMF and Germany get on board, the shared currency might find enough momentum to surge past its previous highs.
New Zealand has its global dairy trade auction scheduled mid-week and this could show another decline in prices, sending the Kiwi lower against its forex rivals. Aside from that, the quarterly PPI might also reflect declines in input prices and set the tone for another RBNZ rate cut sometime this year.
There are no economic reports lined up from the euro zone today, as the main event risks are set for Friday. These are in the form of the flash PMI readings from the manufacturing and services sectors of Germany and France, the region’s largest economies. Strong data could provide more fuel to the euro’s rallies while weak data could lead to losses.
By Kate Curtis from Trader’s Way