Technical Sentiment: Bearish Key Takeaways
Traders shorting the Euro currency will sleep without a worry tonight, since the overall bearish bias appears to be worsening for the domestic pair. EUR/NZD has all the proper confirmations to take a nosedive from the current high, from price action signals to a respectable resistance rejection.
A 5-week uptrend spanning approximately 490 pip came to a swift halt earlier in the European session. There is absolutely no desire from traders to keep the domestic pair at current levels as the pair continues to drift lower across the board against all major counterparts.
EUR/NZD topped at 1.5895 after a failed attempt to move completely above the 100-Day Simple Moving Average, rejecting off the 61.8% Fibonacci Retracement between the High at 1.6201 and the low of 1.5407. A long term resistance trendline dating back to December 2013 was also backing this area. On the Daily chart the pair is currently forming a bearish Pin / Bearish Engulfing Bar, adding price action confirmation that this sell-off is nowhere near exhausted and a continuation lower is expected over the coming trading sessions.
Traders are likely to eye the support cluster at 1.5686, offering a decent R:R for a sell trade from current levels (1.5825). At 1.5686, the pairs’ reaction around the major price pivot zone and most recent EUR/NZD Higher Low will determine if this sell-off is just a correction or a larger downtrend revival.
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A rally above 1.5898 will invalidate all bearish scenarios and open the way higher, all the way up to the 200-Day SMA (1.6134) in the coming weeks.
********* Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
