EUR/NZD Breaks Below Critical Support

October 21, 2014

Technical Sentiment: Bearish

Key Takeaways

  • EUR/NZD invalidated Higher Low swing configuration, turning bearish;
  • Spot is currently trading below 200-SMA on 4H and Daily timeframes;
  • 5700 might be in play within a few days.

Euro suffered a broad sell-off against a basket of currencies on Tuesday. Among other pairs, EUR/NZD tumbled below a 2-week range, signaling more losses in the near future.


Technical Analysis

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While it’s still early in the day to make definitive conclusions, today’s euro weakness is likely to persist, leading into a much deeper sell-off as the long term downtrends take over the markets once again. EUR/NZD has been predominantly choppy for two weeks now, with price action stuck in a very narrow range between 1.6015 and 1.6200/50. From a technical perspective price, stayed on the bullish side during this period, above the 200 SMA on 4H and Daily, coupled with consistent higher swing lows.


Consequently, today’s break is viewed as a strong bearish signal now that sellers are searching for a new lower low. While 200 SMA acts as resistance EUR/NZD is going to aim lower. 50-Dau and 100-Day are unlikely to represent huge resistance levels. Instead, we see 1.5700 as a huge attraction point, based on previous reactions which confirmed this level as a strong pivot zone.

Daily stochastic is heading towards oversold territory; however there’s still plenty of room for this move to develop even further. Bears should watch out for possible reversals back above 1.6000. Price stabilizing in this region could trigger a prolonged period of choppy behavior.

Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets






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