Mixed Indicators Signal High Volatility with Expanding Trading Range

Summary:

As Europe embraces a stronger euro and fiscal support, the era of monetary easing is drawing to a close. Meanwhile, New Zealand's BNZ Manufacturing Index has plunged to 47.5, re-entering contraction territory.

BUY EURNZD

Close Time

CLOSED

1.91149

Entry Price

1.96200

1.89000

1.98113 +0.02335 +1.19%

337.3

Pips

Profit

1.89000

1.94522

Exit Price

1.91149

Entry Price

1.96200

Fundamentals

Isabel Schnabel, a member of the European Central Bank's Executive Board, indicated on Thursday that the ECB's monetary easing cycle is "nearing its end," given the stable medium-term inflation outlook and improved macroeconomic conditions. She confidently projected an inflation rate of just 1.6% for 2026, attributing the temporary decline in inflation to base effects in energy prices and the euro's strength.

Schnabel painted a relatively optimistic picture of the eurozone's economic prospects, noting that despite heightened global trade tensions, eurozone economic growth remains "broadly stable." Private consumption continues to be a key pillar of support for the economy, while the manufacturing and construction sectors are also showing signs of recovery. She emphasized that "additional defense and infrastructure spending has offset the impact of tariffs on economic growth."

These structural shifts, combined with the euro's resilience and the strong performance of equity markets, reflect a "new European growth narrative," which could enhance the region's economic standing.

In contrast, New Zealand's BNZ Manufacturing Index has fallen to 47.5, re-entering contraction territory.

The latest data released on Friday showed that New Zealand's Manufacturing PMI for May plummeted to 47.5 from 53.3 in April, highlighting the pressures faced by the manufacturing sector, including declining orders, rising costs, and waning confidence.

The New Orders Index also dropped from 50.8 to 45.3, supporting the view that the economy's return to a growth trajectory is at risk of being disrupted.

The sharp decline in business confidence is also evident, with 64.5% of respondents providing negative assessments, up from 58% in April. This reflects the growing pessimism among manufacturers as they grapple with falling demand, weak forward orders, and subdued consumer spending. Rising input costs, ongoing economic uncertainty, and stalled investment plans have further exacerbated the pressure on businesses.

Previously, the market had anticipated steady progress for New Zealand's economy in 2025, but the latest PMI data suggests an increased risk that the GDP rebound seen in Q4 2024 and Q1 2025 could stall (bearish for the NZD).

Mixed Indicators Signal High Volatility with Expanding Trading Range_1

Technical Analysis

The EURNZD pair formed a head-and-shoulders top pattern between April 2 and 15 but failed to fully materialize the pattern's downside target below 1.8798. Instead, it recently broke above the consolidation range at 1.9163, signaling a potential shift in market sentiment.

The moving averages (MA 5, 10, 20, 50, 100, and 200) have all turned positive, generating a consistent "buy signal."

The Relative Strength Index (RSI 14) stands at 57.8, within the neutral-to-bullish range but not yet overbought, indicating ample upside potential.

The Moving Average Convergence Divergence (MACD) has slightly turned positive, supporting the continuation of upward momentum.

The Average Directional Index (ADX) is at 5, signaling a strong trend with a clear upward bias and potential for continuation.

The Average True Range (ATR) reflects high volatility and an expanding trading range.

The technical outlook for the asset is currently bullish. Traders are advised to wait for a suitable pullback to enter long positions, employing a trend-following strategy with stop-loss levels set based on support levels. If the pair breaks above the resistance level at 1.9238, it could open the door for the next round of bullish targets.

Trading Recommendations

Trading Direction: Long

Entry Price: 1.9115/1.9080

Target Price: 1.9620

Stop Loss: 1.8900

Deadline: June 28, 2025, 23:55:00

Support: 1.9115/1.9080/1.8983

Resistance: 1.9237/1.9266/1.9296

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