EUR/NZD has been in a surging mode yesterday and continued to drift north overnight, during the early Asian morning today, breaking above the key resistance (now turned into support) hurdle of 1.6780, which prevented the rate from pushing higher during the second half of November. That said, the rally was stopped near the 1.6975 zone and then the rate retreated somewhat. Bearing in mind that EUR/NZD is trading above the prior downside resistance line drawn from the peak of the 10th of October, as well as above a new uptrend line taken from the low of the 5th of December, we will consider the short-term outlook to be positive for now.
We would expect the bulls to take charge again at some point soon and perhaps aim for another test near 1.6975. If they manage to overcome that hurdle, then we may see them extending the recovery towards our next resistance, at around 1.7075, which was proven a good support zone from the 1st until the 6th of November, when it was broken. That said, bearing in mind that the rally appears overstretched, we would expect some further retreat before the bulls decide to shoot again.
Our momentum studies support the notion for some more downside, perhaps for the rate to test the 1.6780 zone as a support this time. The RSI has topped within its above-70 zone, and looks ready to fall back below 70 soon, while the MACD, although well above both its zero and trigger lines, shows signs of slowing down. It could start topping as well.
Now, even if the rate falls below the 1.6780 zone, we would still hold a cautiously positive view. We would still see a decent chance for the bulls to take charge from near the 1.6700 area, or the aforementioned uptrend line. We would like to see a decisive dip below 1.6540 before we start examining whether buyers have left the building. Such a dip could initially aim for the 1.6425 zone, the break of which may carry extensions towards the 1.6335 territory, defined by the lows of the 4th and 5th of December.