EUR/NZD falls 100-pips in two days from weekly tops breaks below 1.7100

• In the last week, the EUR gained 400-pips after ECB’s Lagarde failed to push back a rate hike in 2022.
• Central bank monetary policy divergence favors the NZD vs. the EUR.
• EUR/NZD Technical Outlook: Neutral, but a daily close below 1.7094, might send the pair tumbling towards 1.6940.

The EUR/NZD extends its losses to three consecutive days, following some ECB speaking that calmed the markets, as STIR futures have priced in 50 basis points of rate hikes of the ECB by the end of 2022. At the time of writing, the EUR/NZD cross-currency is trading at 1.7088.

Last Thursday, the European Central Bank (ECB) decided to keep its monetary policy unchanged. However, during the press conference, ECB’s President Christine Lagarde did not push back against hiking interest rates in 2022,  as she did in previous monetary policy meetings. 

The divergence between the RBNZ and the ECB bolstered the NZD

Market players perceived that as a hawkish pivot by the ECB, sending the EUR/USD rallying, breaking 1.1300 and 1.1400 on its way towards 1.1480s. Concerning the EUR/NZD, the pair rallied from 1.6960s towards 1.7357 regardless of the Reserve Bank of New Zealand (RBNZ), which already began tightening conditions with 50 bps of rate hikes in 2021.

Therefore, due to the RBNZ tightening monetary policy conditions with its Overnight Cash Rate (OCR) at 0.75% as of today, while the ECB’s deposit rate at 0% favors the prospects of a lower EUR/NZD pair.

EUR/NZD Price Forecast: Technical outlook

In the overnight session for North American traders, the EUR/NZD was rejected by the 100-hour simple moving average (SMA) at 1.7199, sending the pair tumbling during the rest of the day, breaking the 1.7100 figure on its way down.

That said, the EUR/NZD first support would be the February 3 daily high previous resistance-now-support at 1.7094. Breach of the latter would expose the February 3 daily low at 1.6974, followed by February 1 1.6940.