August 23, 2021 8:16:33

While safe haven currencies were the top performers last week, EUR held up next best as investors sought some stability. But the move is not on the back of any positive reassessment of the Eurozone economy and may not be sustained. Allowing for the Delta variant uncertainty, currencies which have central banks moving towards tighter monetary policy should be rewarded.

This ought to be the case for EUR/NZD and EUR/CAD. Both the RBNZ and Bank of Canada are expected to raise interest rates up to four times and one or two times respectively in the next twelve months. On the flip side, the ECB will stand pat and keep rates unchanged until 2024. Any commodity price normalisation should also help these pairs.

EUR/NZD touches resistance zone

It is clear from the weekly chart that EUR/NZD has been tracking sideways around 1.69 for several weeks. This can also be seen in the weekly RSI indicator which has oscillated around the 50 mark. Last week’s bullish move took the pair to the top of the range. But prices have hit a resistance area that includes the 200-day weekly moving average and previous support at the early July lows. This has acted as strong resistance already this year. If sour risk sentiment abates, then sellers can put stops above last week’s high at 1.7163 and aim for a move back towards 1.70 and 1.69 in the middle part of the long-held range.

EUR/CAD spike high

This pair is similar to EUR/NZD but prices spiked higher last week as oil moved sharply lower. The weekly chart shows a bullish move to the top of the recent range above 1.51. Again the 200-week SMA proved to be solid resistance along with previous support from the Springtime lows around 1.5055. With the daily chart showing a bearish pin bar candle from Friday, sellers can target a move lower back to 1.49 and ultimately below 1.47 if positive risk sentiment increases. Last week’s high at 1.5145 gives us an area for stops.