FX Play of the Day: EUR/NZD Uptrend Pullback Ahead of ECB Decision

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Who’s ready to trade the ECB decision?

I’m looking at this simple trend setup on the hourly chart of EUR/NZD to gauge if support levels might hold.

As you can see from the chart below, the pair has formed higher lows and higher highs connected by an ascending channel.

EUR/NZD 1-hour Forex Chart

EUR/NZD 1-hour Forex Chart by TV

Price is dipping to the mid-channel area of interest, which happens to be right smack in line with the 50% Fibonacci retracement level.

A larger correction could find more buyers at the 61.8% Fib that’s closer to S1 (1.7750) and a former resistance zone that might now hold as a floor.

Stochastic is already starting to climb, suggesting a return in upside pressure. I’m even seeing higher lows on the oscillator and lower lows on EUR/NZD, creating a bullish divergence!

Moving averages are also hinting at a continuation of the uptrend, as the 100 SMA is above the 200 SMA to reflect the presence of bullish vibes.

In that case, the pair could recover to the swing high at 1.8065 or the top of the channel closer to the 1.8100 major psychological mark soon.

I’ll be keeping close tabs on the July ECB statement, though, as their rhetoric would likely determine where the shared currency is headed for the rest of the week.

An interest rate hike has been priced in for quite some time now, so market junkies might be more curious to find out if the central bank will keep the door open for future tightening moves.

A more cautious announcement could spur short-term losses for the euro, possibly leading to a test of the actual channel support around 1.7650. A break below this, however, could mean that a reversal is in the works.

Do you think the ECB would sound less hawkish this time?

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About the Author: Webbey Team

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