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Trading the Eurozone is anchored mainly on price pressures. This is all along the lines laid out by the ECB and Mario Draghi has reiterated several times on the length the ECB is prepared to take should there be a threat on any of the contributing metrics. They even said despite the taper, the doors are wide open for QE. Analysts and other commentators see the first rate hike in 2018, perhaps the first quarter, no one really knows.
For traders and Euro bulls any growth in the Eurozone consumer market shows a bouncing economy. Well, yesterday the Markit and Composite Service PMI expanded to 56 and 57.5 respectively showing how the top four Eurozone economies are expanding. Additionally, data indicated that the rate at which jobs are growing is the fastest in 17 good years. These are definitely good news but the Euro is surprisingly lower especially against the AUD which underperformed investor’s expectations when GDP data were released earlier today.
According to Australian Bureau of Statistics, Q3 GDP expanded slowly than expected but was at least better than Q2. It rose 0.6% vs 0.7% while the annualized GDP came in at 2.8% which is still better than Q3 which printed 1.8% but lower than expectations at 3%. This is positive despite not surging past expectation and as a result, I expect the AUD and because of the high positive correlation the NZD to trend higher in the coming sessions.
EURNZD Technical Analysis
In the daily chart, prices are making lower lows relative to the upper BB and as it is, NZD bulls are likely to test support trend line connecting September to November lows. You must note that this lower lows is accompanied by decreasing bull momentum after the 61.8% Fibonacci extension level had been hit. The only logical thing is for prices to test Q3 highs of 1.665 but first we need Euro bears to close strongly below the middle BB. If it does, then our first target will be €1.665 with stop loss above today’s highs marked at €1.72.
Therefore, our trading plan will be as follows:
Stop loss: €1.72
Take Profit: €1.665
Have a good trading day.
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