EURNZD fell after the hawkish change from the Reserve Bank of New Zealand today. Persistent inflation and higher-than-expected demand growth turned the RBNZ more hawkish. The expected rate cut path has been revised to a slower one, with the first cut forecasted for the second quarter of 2025 instead of the first quarter. The RBNZ stated that the current level of the rate is sufficient to bring inflation down but will increase it further if inflationary pressures are stronger than expected. Markets still expect a rate cut in the third quarter of 2024.

(EURNZD Daily Chart)

With the hawkish shift from the RBNZ and the Eurozone grappling with budget adjustment problems, EURNZD is testing the 15-month-long trendline. The trend is supported by the 200 DMA, but EURNZD lost the support of the 50 DMA yesterday. If Eurozone growth expectations falter even more and New Zealand’s inflationary pressures remain high, the trend might break to the downside in the coming weeks. In that case, 1.7475 and 1.7170 are possible targets for downward moves. These levels are the Fibonacci 38.2% and 50% levels but have also been key horizontal supports and resistances since late 2022. Despite the downward pressure, as long as the trend holds with no daily closes below it, NZD bulls should tread with care, as the trendline has been supporting upward moves for months and has been tested three times already without breaking.