Binary Options Analysis – Trade of the Week: EUR/NZD 20th April 2015

New Zealand – Consumer Price Index

On Sunday, at GMT 1.:45 p.m., the Statistics New Zealand released the quarter-over-quarter consumer price index (CPI), which measures the changes in the price of products and services bought by consumers in the country over the past quarter.

Since consumer prices are responsible for the majority of the inflation in the economy and the CPI is the primary tool used by the Reserve Bank of New Zealand to measure inflation, binary options traders consider this data extremely important, as rising inflation can indicate future rate hike by the RBNZ.

In the fourth quarter of 2014, New Zealand’s CPI (q/q) came out at negative 0.2%, indicating a deflation happening in the economy. The forecast for the first quarter of 2015 was set at -0.2% deflation. However, the actual figure suggested that the deflation in the New Zealand’s economy was actually worse than what the market was expecting, as it came out at -0.3%.

Eurozone – German ZEW Economic Sentiment

On Tuesday, at GMT 9:00 a.m., the Zentrum fur Europaische Wirtschaftsforschung (ZEW) will release its German economic sentiment, which measures the level of a diffusion index by surveying 275 German analysts and various institutional investors.

Binary options traders consider the German ZEW Economic Sentiment to be a leading indicator of the overall Eurozone economy because the German economy makes up a large portion of the Eurozone. In addition, the ZEW survey tends to include only sophisticated investors and analysts and the index often can signal future economic activity in the country.

In March, the German ZEW Economic Sentiment index reading came out at 54.8 and the forecast for April is currently set at 56.0.

EUR/NZD Outlook

Chart EURNZD, D1, 2015.04.20 05:41 UTC

Since the end of September 2014, the EUR/NZD price has remained in a strong down trend and on March 11, the pair broke below the important historical pivot zone around the 1.4550 level.

After closing below 1.4550, the support turned into a strong resistance and although the EUR/NZD tested this level few times, it failed to penetrate above it. Subsequently, the EUR/NZD price resumed the downtrend. Last week, it finally closed below the previous low from March 23.

As the inflation in the New Zealand’s economy is currently in negative territory, the RBNZ may move to cut the interest rate further in an attempt to reach target inflation level by Q2’2015. However, the German ZEW Economic Sentiment has also fallen short of the forecast for the last two months in a row, indicating further bearish movement in the pair.

Under the circumstances, it is recommended that binary options traders consider placing a PUT order with the EUR/NZD, as the price should be heading towards the 1.3875 level, which is the 161.8% Fibonacci extension level of the previous upward swing.

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About our Forex Analyst:  Asif Imtiaz

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