EUR/NZD breaks out

Given today’s break above the key 1.7580-1.7600 resistance area, the path of least resistance is clearly to the upside at the moment.

The markets have been relatively quiet over the past couple of days, which has made our job a little trickier in trying to find new ideas.  This partly explains why I am looking at the EUR/NZD cross today, which is admittedly not a heavily-traded market. However, this doesn’t take away from the fact price action has been very beautiful for the bulls of late, and today’s breakout above the key 1.76 handle means the bullish trend could continue for a while yet.

Here are two major scenarios that could unfold going forward:

  1. With the EUR/NZD currently holding above all its major moving averages, making higher highs and higher lows, and given today’s break above the key 1.7580-1.7600 resistance area, the path of least resistance is clearly to the upside at the moment. As such, rates may aim to move towards the next round handles such as 1.7800 and 1.7900 next, with the psychologically-important 1.8000 handle being our ultimate bullish objective – for this level sits just above the 2018 high of 1.7930.  
  2. However, if the above-mentioned breakout area of 1.7580-1.7600 fails to hold as support upon a potential re-test, and rates close back below this region, then in that case the breakout bullish traders will be trapped and the sellers could step in to drive prices sharply lower as a result.
So, scenario 2 is an equally compelling idea to consider, although our base case is the bullish idea outlined under scenario 1 above.

Source: eSignal and City Index.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.