Figure: EURNZD, H4, Tradingview    Figure: EURNZD, H4, Tradingview  

European Inflation Puts the Euro to the Test

Financial markets are closely awaiting today’s release of the final inflation readings for the Eurozone, with economic forecasts pointing to stability in the annual core consumer price index (CPI) at 2.2% and the headline CPI at 3.0%. These figures are considered highly crucial in shaping the European Central Bank’s upcoming monetary policy decisions.

If the actual readings come in higher than expected, the ECB may be forced to slow down the pace of monetary easing, which could provide the euro with temporary support. On the other hand, if the data matches or falls below expectations, this would strengthen expectations for continued interest rate cuts, increasing selling pressure on the euro, particularly against high-yield and relatively stable currencies such as the New Zealand dollar according to analysts. This could serve as a key catalyst for the anticipated technical decline.

Technical Outlook

From a technical perspective, the EUR/NZD pair is trading within a descending price channel on the four-hour timeframe, with price action continuing to form lower highs and lower lows, reflecting the prevailing bearish trend.

Recently, the pair managed to form a corrective bullish wave within the descending channel, pushing prices toward a retest of the channel’s upper boundary (resistance line). Adding further technical significance to this area is the emergence of a clear bearish divergence between price action and the Relative Strength Index (RSI). While the price attempted to post an equal or slightly higher high near the latest horizontal resistance levels, the RSI recorded lower highs, as illustrated by the downward-sloping black trendline, as per analyst analysis.

This behavior reflects weakening bullish momentum, while the current price rejection reinforces the likelihood that the corrective wave has ended and the broader downtrend is resuming. The pair is therefore expected to target the 1.9800 level as an initial downside objective, followed by the dotted median line, as long as prices remain below the descending channel, as per analyst analysis.