Technical Sentiment: Bearish
Key Takeaways
After a slow Friday, EUR/NZD is off to an even slower start this week as short traders are reducing the pressure after hitting a major pivot zone in the 1.5565-85 area. A correction may be enforced from current levels, toward 1.5683 and 1.5765, mainly to shed the oversold conditions before the main downtrend resumes.
Technical Analysis
EUR/NZD is trading just above 1.5600, after a second perfect bounce off 1.5565. Although this short term Double Bottom reversal pattern does not quite have any strong momentum behind it, the timing and location adds to its credibility.
Stochastic is in heavy oversold territory on both the Daily and 4H time frames, suggesting a possible bottom is forming in this area and a bullish correction is somewhat overdue at this time. 1.5565-85 was a fairly strong price pivot zone in the first half of 2013, consequently it is reasonable to expect traders are once again paying attention to it.
Free Reports:
A rally above Friday’s high of 1.5685 will confirm the double bottom, opening the way to the main area of interest: the previous support level around 1.5765. A strong rejection at this level could trigger another bearish leg for EUR/NZD, with potential for a Daily Lower Low extending towards 1.5226.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
