The EUR/NZD pair fell slightly during the session on Friday, but as you can see sits just above the psychologically significant 1.55 handle. This area has been rather supportive lately, as we have been consolidating, but as you can see we have been in a downtrend for some time. With this, the market looks as if it’s ready to perhaps bounce from here and head back towards the 1.58 level, but we believe that the area should be rather resistive. If we break above the 1.58 level, there is a downtrend line that we will have to contend with, and if we can get above there all of a sudden this is an uptrend by its very definition of a “higher low.”
On the other hand, if we break down below the 1.55 level, the next significant level below is the 1.50 handle, which of course is a major psychologically significant round number. At that point time, I would expect to see a lot of buyers step into the marketplace, pushing the market back higher. However, the likelihood of a break out right away is probably fairly slight, as I believe a countertrend trade is about to set up.
The New Zealand dollar looks ready to break out, but needs to pullback first.
The NZD/USD pair looks very strong, but also looks as if it could pullback from the 0.88 level, as it is significantly resistant. With that, I believe that the New Zealand dollar will lose a little bit of value in the short-term, but ultimately should continue to go higher, pushing the New Zealand dollar higher against most currencies. I believe that the Euro won’t be any different against the New Zealand dollar, and as a result we will ultimately fall from this general vicinity. However, I recognize that we could get a little bit of a bounce over the next couple of sessions, so I would be willing to buy a hammer in this general vicinity or some type of supportive candle. Once we get towards the 1.58 level though, I would fully anticipate a resistant candle that could be sold. On the other hand, if we simply break down below the 1.55 level, I think we continue to sell off.