EUR/NZD traded lower on Friday, breaking below the support (turned into resistance) level of 1.6487 and signaling the completion of a short-term “double top” formation. The rate continued drifting south and today, during the early Asian morning, it hit support near 1.6435. Then, it rebounded somewhat. In our view, the completion of the double top, combined with the fact that the rate is still trading below the downside resistance line drawn from the high of January 22nd, suggests that the bears may be willing to continue pushing lower for a while more.
That said, before we get confident on some further declines, we would like to see a clear dip below 1.6405, a support defined by the inside swing high of March 26th. That zone was also proved to be a strong support back in mid-February, as well as on March 12th. Such a break may open the path towards the 1.6345 barrier, the break of which could set the stage for a test near the lows of March 26th and 27th, at around 1.6290.
The RSI turned down from slightly below its 50 line, while the MACD lies below both its zero and trigger lines, pointing south as well. These indicators detect downside momentum and support the notion for this exchange rate to continue drifting lower in the short run.
On the upside, a break back above 1.6487 may signal that the bears have decided to take a small break and may allow a recovery towards 1.6540. Another break, above 1.6540, could aim for the 1.6575 hurdle or the aforementioned downside line drawn from the high of January 22nd. Having said all that though, in order to start assessing whether the bulls have gained full control, we would like to see the rate closing above that downside line, as well as above 1.6575.
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