EURNZD Looking Heavy

Following the heavy declines of the last two months, EURNZD has been trading within a tight block of corrective consolidation over recent weeks. The local formation can be viewed a bear flag, suggesting a breakdown and continuation of the longer-term downtrend. The 16159 level represents major support in EURNZD and a break below here will be firmly bearish, allowing for short sellers to target 1.5998 and 1.5884 thereafter.

With the retail community around 90% long, there is plenty of room for a breakdown to gather momentum here. The divergence between monetary policy expectations for the ECB and RBNZ favours a continuation of the recent trend, especially with the Eurozone grappling the start of a potential fifth wave of COVID which is raising uncertainty heading into the winter.

Key Data to Watch

Eurozone CPI and NZD inflation expectations will be the two main readings to focus on this week. However, the broader themes of monetary policy expectations, COVID developments and movements within the USD/commodities space will be key to keep an eye on also.