Euro to Remain Bearish after French Elections & ECB’s Dovish Stance

EuroThe Euro Zone has temporarily turned into a risky place for investment after the rise of anti-EU leader Marine Le Pen. This, in turn, has weakened the Euro against New Zealand Dollar which is a commodity currency.

The currency pair EUR/NZD decline has stopped at 1.5156 levels previous week due to an improvement in German ZEW economic sentiment data. We are of the opinion that the halt is not permanent and it is likely that the currency pair would begin its downtrend soon.

According to a currency strategist at Bank of New Zealand, Jason Wong, the New Zealand (Kiwi) Dollar is undervalued and a rebound is likely to happen. According to Wong, increase in the prices of the commodity, rise in risk appetite and the extremely oversold scenario is clearly favoring the rally of Kiwi Dollar.

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The data (Commitment of Traders Report or COT) is reported weekly by CFTC. It pertains to short and long positions in the future market. According to the data, the net short position in the dollar at the moment is at its highest level since 2016. As per the analysts, a short covering is likely to bring in a steep rally in New Zealand dollar.

Dairy products constitute a major portion of the export revenue of New Zealand. During the auctions conducted on 21st March and 4th April this year, there was an increase in the dairy product prices with an average price above $3000 per ton. The rise in dairy prices is yet to offset the 6.3% drop registered on 4th March 2017. However, the analysts are of the belief that dairy prices are likely to rise because of the widespread flood that occurred in the North Island. The New Zealand Dollar will be further strengthened by the increase in dairy product prices.

The economists have pointed one more important fact favoring the rally in New Zealand Dollar. The Kiwi Dollar is unmoved even when all the currencies are falling apart after the recent news of Syrian bombing.

Due to the upcoming elections in France, the Euro Dollar is in a weak position. The investors over there have become nervous after the increasing chances of anti-EU leader Marine Le Pen’s victory. In addition to this, Euro Dollar is weak because of the dovish stance of ECB President Mario Draghi. The President of ECB has commented that in order to help the Euro Zone’s economic recovery, they would continue with their accommodation policy.

Technically, the currency pair is facing resistance at 1.5210 with MACD indicator moving below zero line. This clearly indicates a lack of buying support. The currency pair is trading below at 1.5248. Hence, we can easily anticipate the pair would decline in the coming time.

EURNZD Pair April 17th 2017

EURNZD Pair April 17th, 2017

In order to gain from the impending downtrend of the currency pair, you can open a short position in the currency market. The pair can be sold when it is trading near 1.5160. The profit order and stop loss can be placed at 1.4980 and 1.5260 respectively.

You can buy a put option from any recommended binary options broker and establish a short position in the EUR/NZD currency pair. The expiry date should be placed one week later and you need to buy the options when it is trading near 1.5160.


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