A NZDUSD Downward Spiral Lies Ahead

11.11.14

A NZDUSD Downward Spiral Lies Ahead

GBPCAD

GBPCAD Range Support at 1.7875 | Bounce to Resistance at 1.8200

GBPCAD has been moving sideways as it found support at the 1.7875 area and resistance at 1.8200. At the moment, the pair is moving at the lower half of its range and may be due to test the bottom soon.

Stochastic is starting to climb out of the oversold area, indicating that buyers could take control of price action soon. In that case, a bounce might take place even before the pair tests support and a move back to the resistance is likely.

Without any major market catalysts on tap from the UK and Canada today, this consolidation pattern is likely to hold for the time being. Tomorrow, major events are up for release from the UK, namely the jobs data and BOE inflation report, and these might lead to price breakouts.

Until then, traders might hesitate to take any directional biases for pound pairs and keep ranges intact for the time being. A downside break, however, might lead to as much as 300 pips in losses while and upside break could lead to 300 pips in gains since the rectangle chart pattern is roughly of the same height.

NZDUSD

NZDUSD Descending Channel | Potential Test of Resistance at .7750

NZDUSD has slowly been trending lower, as the pair is moving inside a falling trend channel on its short-term time frames. Price recently bounced off the top of the range and may be headed lower, although it seems that another test of resistance is likely.

The top of the channel is around the .7750-.7800 psychological levels which might hold as resistance, especially since stochastic is almost in the overbought area already. If this continues to hold as a ceiling, NZDUSD could find more selling momentum to head back to the bottom of the channel near the .7650 mark.

On the other hand, an upside break from the channel resistance might mean a reversal for the pair, with potential gains until the .8000 handle. There are no major events lined up from the US economy today though, which suggests that a potential move might be a result of New Zealand data

A speech by RBNZ Governor Wheeler is set for the upcoming Asian trading session, along with the release of the central bank’s Financial Stability Report. Upbeat remarks could lead to further gains while more jawboning and dovish remarks could lead to a move to .7650 or lower.

EURNZD

EURNZD Testing Range Support | Resistance at 1.6250

EURNZD has been moving inside a range for more than a month already, as the pair is currently testing support at the 1.6000 major psychological level. A bounce could take price back up to the range resistance at the 1.6250 minor psychological resistance once more.

There are no major reports out of the euro zone and New Zealand today, making the consolidation pattern likely to hold. In the event of a breakdown though, EURNZD could fall by as much as 250 pips, which is the same height as the rectangle formation. A break past the range resistance might lead to 250 pips in gains as well.

Stochastic is moving down from the overbought zone, which suggests that selling pressure is building up. A significant break below the 1.5950 area could be enough to confirm that the pair is headed further south and that a longer-term selloff could be possible.

In terms of policy biases, both the RBNZ and ECB are leaning on the dovish side, with the ECB already putting several easing measures underway. With that, the path of least resistance is still to the downside, with traders also finding additional appeal in the positive carry of a short trade.