In today’s comprehensive EURNZD forecast, we will first scrutinize the current economic conditions in the Euro area. Following that, we will meticulously delve into the details of the technical analysis pertaining to the EURNZD pair.
The Persistent Downturn in Eurozone’s Manufacturing Sector
Bloomberg – In November 2023, the Eurozone’s manufacturing sector displayed a small but notable improvement. The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to 44.2, up from 43.1 in October. This increase marks the highest level seen since May. However, it’s important to recognize that despite this increase, the manufacturing sector is still facing a period of contraction – this has been the case for the past seventeen months.
The contraction in manufacturing has been uneven across the Eurozone, with some countries experiencing more significant declines than others. Austria is at the forefront of this downturn, with Germany and France also seeing notable declines. This regional variation highlights the differing economic conditions and challenges faced within the Eurozone.
Several factors have contributed to the ongoing contraction in manufacturing:
- Output: There has been a continuous decrease in production, although the pace of this decline has slowed down.
- Orders and Sales: Both new orders and export sales have been declining, indicating a reduced demand for Eurozone manufactured goods.
- Backlogs and Employment: Work backlogs have been diminishing for a year and a half, indicating a lack of new orders. Employment in the sector is also decreasing, with job losses reaching a rate not seen since August 2020.
- Supply and Delivery: The delivery times from suppliers have been improving for ten months in a row.
- Pricing: Prices for inputs and outputs are in a deflationary phase, meaning they are decreasing.
Despite these challenges, there is a silver lining. Business confidence within the sector has improved, reaching its highest in three months. This could indicate a more positive outlook for the future.
Impact on the Economy
The sustained contraction in the Eurozone’s manufacturing sector is a concern for the broader economy. Manufacturing is a key driver of economic growth, job creation, and innovation. Prolonged downturns can lead to job losses, reduced consumer spending, and lower economic output. However, the slight improvement in PMI and growing business confidence may signal the beginning of a turnaround, which could help stabilize and eventually grow the economy.
EURNZD Forecast: Technical Analysis
The selling pressure on the EURNZD currency pair has intensified, surpassing general expectations. When the price approached the 1.771 area, major players refrained from stepping in, resulting in an escalation of the downward momentum. This significant shift was confirmed once the pair broke below the lower line of the bearish flag pattern on the EURNZD daily chart.
Currently, the bearish bias is driving the RSI indicator towards the oversold zone. Yet, there’s still potential for the indicator to reach an oversold state. FxNews analysts anticipate a further decline, targeting the 1.7519 support level, followed by the lower boundary of the bearish flag. Let’s zoom in to the 4 hour chart to find when the market might exit the bullish bias.
Should the market enter an oversold condition, the EURNZD price might approach the 38.2%, followed by the 50% level of the Fibonacci retracement tool. Analysts at FxNews believe that the bearish trend, which started on November 14th, will only be deemed invalid if the price breaches the 50% Fibonacci level.
J.J Edwards is a finance expert with 15+ years in forex, hedge funds, trading systems, and market analysis.