The EURNZD currency pair has climbed above 1.9900 after the Reserve Bank of New Zealand (RBNZ) adopted a dovish stance. Right now, it’s trading above the session’s 2-standard deviation high for implied volatility. Traders should keep an eye on the 2.00 level, which hasn’t been seen since April, as it presents strong resistance. This rise comes as currency movements fluctuate across NZD pairs.

Mixed Market Signals

Today’s market signals are mixed. European stocks are struggling, and the USDJPY is waiting for important comments from Powell. Recent inflation data from the UK is increasing pressure on the Bank of England. Foreign exchange trading carries high risk due to leverage and the potential for losses. Investors are advised to only invest what they can afford to lose and to seek advice when necessary. Remember, past performance does not guarantee future results. InvestingLive is not an investment advisor and shares information for educational purposes only. Clients should evaluate all market information based on their own situations and be cautious about relying solely on online information.

Psychological Resistance Level

The RBNZ’s recent dovish shift, including talks of a large rate cut, has weakened the Kiwi dollar significantly. This has pushed EURNZD past the 1.9900 mark as the market adjusts interest rate expectations for New Zealand. New data shows that overnight index swaps indicate about a 70% chance of a 25 basis point cut at the RBNZ’s meeting in October. Meanwhile, the Eurozone’s inflation flash estimate for July 2025 stands at 2.4%, keeping the European Central Bank on a more cautious track. This difference in policies strengthens the Euro against the NZD. We are nearing the key psychological resistance level at 2.0000. Historically, we haven’t seen the pair hold above this level since the early 2020 pandemic shock. This area is crucial for a potential breakout or reversal. Given the current high implied volatility, buying standard call options for more upside could be costly. A better strategy might be to use bull call spreads. This approach can lower the initial trade cost while still allowing for profits as we move toward the 2.01-2.02 range, thus managing risk in a volatile market. However, it’s essential to recognize that the market is currently stretched and trading far outside its usual daily range. Any unexpectedly hawkish comments from central bankers at the upcoming Jackson Hole symposium could trigger a sharp pullback. Therefore, we must be careful with our position sizes over the next few weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now