EUR/NZD seems to be done with its climb, as the pair is forming a reversal pattern on its 4-hour time frame.

Are we about to see confirmation soon?

EUR/NZD 4-hour Forex Chart by TradingView

After a couple of failed attempts to bust through the resistance at the 1.8500 major psychological handle, EUR/NZD is now testing the neckline support around 1.8100.

A break below this area could be enough to confirm that a downtrend is in the cards, potentially sending the pair lower by the same height as the chart pattern or roughly 400 pips.

But will the floor give way anytime soon?

Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your homework on the euro and New Zealand dollar, then it’s time to check out the economic calendar and stay updated on daily fundamental news!

Earlier this week, New Zealand printed a much stronger than expected jobs figure, throwing cold water on expectations of an RBNZ interest rate cut in the near term. New Zealand has its quarterly inflation expectations report up for release in a few, so an upbeat result could be enough to spur another bullish run for the Kiwi.

Stay on your toes for a potential drop to the next support zone at S2 (1.7900) just slightly below the 200 SMA dynamic inflection point if this happens.

There hasn’t been much on the eurozone’s docket this week, leaving the shared currency to function mostly as a counter currency. Still, keep an eye out for extended risk-off flows that could wind up favoring the lower-yielding euro versus the Kiwi.

If the neckline support around S1 (1.8110) still holds, look out for a bounce to the nearby resistance zones at the pivot point level (1.8280) then the tops near R1 (1.8490). Do note that the 100 SMA is still above the 200 SMA to reflect the presence of bullish pressure.

Whichever way you decide to play this setup, make sure to practice proper risk management techniques and stay updated on the major market catalysts lined up!