The European Central Financial institution financial coverage assertion is correct across the nook, which suggests a pleasant spherical of volatility for the euro could also be up forward.
Will this result in a chance to catch the latest downtrend in EUR/NZD at higher costs?
EUR/NZD Downtrend Bounce?
The large occasion of the week for euro merchants is correct across the nook with the newest financial coverage assertion from the European Central Financial institution. Expectations are that the ECB will make no coverage modifications to rates of interest or bond purchases, and if that’s the case, then merchants will concentrate on feedback concerning futures plans for quantitative easing after the Pandemic Emergency Purchase Programme (PEPP) ends in 2022. Development and inflation forecasts will even be objects to look at for tapering hints as nicely.
With latest information from Europe pointing to a robust restoration within the second quarter and rising inflation circumstances, there are calls from throughout the ECB to scale back stimulus as quickly as potential. However latest sentiment information exhibits that circumstances might begin to gradual (e.g., Eurozone manufacturing growth slows to six-month low in August) as a result of pandemic, which lowers the percentages of totally bullish rhetoric from the ECB tomorrow.
We expect that the ECB is prone to sound extra optimistic than not, particularly with the high rate of vaccination elevating the percentages of a continued restoration in Europe. This might result in a rally within the euro this week, and in that case, a possible alternative to play the downtrend in EUR/NZD at higher costs.
On the 4 hour chart above, we are able to see that EUR/NZD bears have been in stable management because the finish of August, possible benefitting from New Zealand’s ability to control the covid-19 outbreak. Long term, New Zealand is prone to hold the pandemic underneath management and proceed its restoration, elevating the percentages that the RBNZ could raise interest rates before its counterparts, together with the ECB.
That ought to hold stress on EUR/NZD, however tomorrow’s occasion might result in short-term volatility, and if that volatility takes EUR/NZD larger to the Fibonacci retracement space and the earlier consolidation space round 1.6750 – 1.6800, then we’ll be watching that space for potential reversal patterns to play the downtrend.
In fact, if the ECB surprises the markets with a confirmed plan to taper bond shopping for purchases and/or a plan to lift rates of interest, the euro is prone to rally and rally laborious. In that state of affairs, a break above 1.6800 is the value motion sample which will attract recent EUR/NZD bulls and/or pressure the bears to cowl their shorts, probably taking EUR/NZD as much as the 1.6900 – 1.7000 by someday subsequent week.
What do you all assume? Will the ECB occasion elevate volatility within the euro, or will it’s a snoozer occasion? Let me know within the feedback part under!
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