In today’s comprehensive EURNZD forecast, we will first scrutinize the current economic conditions in New Zealand. Following that, we will meticulously delve into the details of the technical analysis pertaining to the EURNZD pair.
The Impact of US Inflation Data
Reuters —The New Zealand dollar has made a significant recovery, almost reaching a value of 0.6 against the US dollar. This development occurred on Tuesday and was primarily driven by a sell-off of the US dollar by investors.
The sell-off was a reaction to the release of the Consumer Price Index (CPI) data in the United States. The data revealed a widespread deceleration in US inflation for October. This slowdown suggests that the Federal Reserve may have reached the end of its cycle of interest rate hikes. The anticipation of this change has led to a shift in investor sentiment, resulting in the strengthening of the New Zealand dollar. This is a clear demonstration of how international economic indicators can have a profound impact on currency values.
Investors are also beginning to accept that the Reserve Bank of New Zealand (RBNZ) may have concluded its series of rate hikes. In its third consecutive meeting in October, the central bank maintained the cash rate at 5.5%. This decision was influenced by the continued easing of inflation in the third quarter.
On the domestic front, recent data revealed a decrease in food prices, which rose by only 6.3% year-on-year in October. This is the smallest increase in nearly two years and marks the fourth consecutive month of easing.
However, despite these positive signs, there is a sense of caution among investors. They are eagerly awaiting the release of key data for October from China, New Zealand’s main trading partner. This data includes figures for industrial output and retail turnover, which could potentially influence the New Zealand dollar’s trajectory.
The Economic Implications
The strengthening of the New Zealand dollar could have both positive and negative effects on the economy. On the one hand, it could make imports cheaper, potentially reducing inflation further. On the other hand, it could make exports more expensive, potentially hurting industries that rely heavily on exporting goods.
EURNZD Forecast: Technical Analysis
The EURNZD pair’s bullish momentum was significantly hampered after reaching October’s high, around the 1.8265 resistance level. The RSI indicator was in the overbought area, leading to expectations of a correction in the EURNZD price.
To gain better insight into the price action, we zoomed into the EUR/NZD 1-hour chart. Here, the pair is trading within a bullish flag. However, it broke down the median line. This suggests that the EURNZD price is likely to continue its bearish momentum towards the lower line of the bullish flag. Should the flag break down, the next target will be the S1 support level at 1.797.
Conversely, the R1 resistance level at 1.823 is pivotal. If the bulls manage to close and stabilize the ERU/NZD price above this level, we could see a continuation of the uptrend momentum.
J.J Edwards is a finance expert with 15+ years in forex, hedge funds, trading systems, and market analysis.