EUR/NZD had been in a tumbling mode on Thursday and Friday, with the slide bringing the rate below the key support (now turned into resistance) zone of 1.6885, as well as below the upside support line drawn from the low of the 5th of December. What’s more, the fall may have also signaled the completion of a complex “head and shoulders” formation and thus, despite the overnight rebound, we would switch to negative for now.
Today, the rate rebounded from 1.6770, but tested the 1.6885 area as a resistance and then, it retreated again. If the bears are willing to stay in the driver’s seat, we would expect them to aim for another test near the 1.6770 hurdle and if they prove strong enough to overcome it, we may see them driving the battle towards the 1.6700 obstacle. A break below 1.6700 could encourage them to put the 1.6610 zone on their radars.
Looking at our short-term oscillators, we see that the RSI, although it rebounded today, the recovery remained limited below 50, and the index turned down. The MACD, already below both its zero and trigger lines, has also started to turn south again. Moreover, both indictors remain below their respective downside resistance lines. These signs suggest that the bears are gaining back their lost momentum and corroborate our view for further declines.
On the upside, we would like to see a decent recovery above 1.6970 before we start examining the bullish case. Such a move may confirm the rate’s return above the aforementioned upside support line and could initially pave the way for the high of the 10th of January, at around 1.7055. Another break above that barrier may carry more bullish implications, perhaps setting the stage for the 1.7155 area, or the high of the 2nd of January, at around 1.7195.
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