Forex Outlook: EUR/NZD, GBP/USD, EUR/JPY

Seasonal point to EUR/NZD weakness [Video]

(Giles Coghlan LLB, Lth, MA – HYCM)

Last week the RBNZ met and it kept to its hawkish path. The board debated that it may have needed to hike by 75bps (it stuck to 50bps in the end), worried the weak NZD was an inflation risk and expected to keep hiking rates. This strengthened the outlook for the NZD going forward.

The Eurozone, by contrast, is struggling with rising inflation, threats of a recession, high energy prices, and a semi-war footing with the Russian and Ukraine crisis. So this does open up a EURNZD sell bias.

Over the last 20 years, the EURNZD pair has fallen a total of 16 times between October 07 and November 07. So, does this mean that the EURNZD pair will track lower from here?

Major trade risks: The major risk is on any backtracking from the RBNZ over interest rate hikes. Also, note the NZD can be slow to respond to NZD monetary policy.

GBP/USD extends decline, approaching the 1.1000 region

(Melina Deltas, CFTe – XM)

GBPUSD has been in a prolonged downtrend since the beginning of the year, plummeting to an all-time low of 1.0324 in mid-September. Even though the pair managed to bounce back and recoup some losses, it has turned lower again after the latest advance fell short near the 1.1480 zone.

The momentum indicators currently suggest that near-term risks are tilted to the downside. Specifically, the stochastic oscillator has dived lower and entered the 20-oversold territory, while the RSI has flatlined beneath its 50-neutral mark.

Should negative momentum strengthen, the price could encounter immediate support at the inside swing high of 1.0929. Dropping lower, the 1.0538 support could come under examination. A violation of the latter could open the door for the all-time low of 1.0324.

To the upside, if selling pressures wane and the price drifts higher, 1.1210 may prove to be the initial resistance point. Piercing through that ceiling, the bulls could aim for the recent rejection point of 1.1480 before the spotlight turns to 1.1763. Even higher, the July resistance of 1.2290 might curb any upside moves.

All and all, GBPUSD’s near-term picture has started to deteriorate, with the price slumping towards its recent lows. For that bearish sentiment to reverse, the pair needs to clearly close above the recent trend reversal region of 1.1480.

EUR/JPY is capped by 20-day SMA in the short-term

(Melina Deltas, CFTe – XM)

EURJPY is easing for the fifth consecutive red day and is being capped by the 20-day simple moving average (SMA). The pair is creating a bearish correction in the short-term timeframe, but it still remains above the long-term uptrend line.

Technically, the RSI indicator is moving slightly lower around the neutral threshold of 50, while the stochastic is entering the oversold zone. Both currently confirm the recent negative movement.

Should prices decline further, immediate support could be found around the 23.6% Fibonacci retracement level of the up leg from 124.40 to 145.65 at 140.60. Then a leg below that level, the pair could meet the 50-day simple moving average (SMA) at 139.90 before the focus shifts to the 138.40 barrier

However, if the market manages to pick up speed, the 20-day SMA at 141.70 could offer nearby resistance ahead of the 144.10 barrier. A significant close above the latter would break the seven-and-a-half-year high of 145.65, raising chances for further increases.

In the long-term, the outlook is likely to remain positive since prices are holding above the uptrend line and the 200-day SMA.