market alert

Australian Dollar Outperforms on RBA Comments, New Zealand Dollar Lags Behind

The Australian dollar surged higher against the greenback as the Reserve Bank of Australia held an improved outlook for the $1T economy, and remains the best performing currency on Wednesday after moving 89% of its ATR, while New Zealand dollar remains the weakest of the major currencies after moving only 69% of its average true range.

The Australian dollar surged higher against the greenback as the Reserve Bank of Australia held an improved outlook for the $1T economy, and remains the best performing currency on Wednesday after moving 89% of its ATR. The AUD/USD crossed back above the 10-Day SMA (0.9258) to reach a high of 0.9304, and is currently 95pips higher from the open following the pull back during the North American trade, and the aussie-dollar looks to be running out of steam following the bearish divergence in the 30-minute RSI. As a result, we may see the pair trend lower ahead of the Asian trade and fill-in the gap from the 100-SMA at 0.9227, and the high-yielding currency may face increased volatility over the next 24 hours of trading as market liquidity thins ahead of the U.S. Thanksgiving holiday. Nevertheless, a Bloomberg News survey shows 18 of the 20 economists polled forecast the RBA to hike the benchmark interest rate by 25bp to 3.75% in December, and long-term expectations for higher interest rates in the $1T economy may continue to drive the exchange rate higher going into the following year.

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The New Zealand dollar rose to a high of 0.7332 as the greenback tumbled lower across the board, but remains the weakest of the major currencies after moving only 69% of its average true range. The kiwi-dollar pulled back from the intraday day and slipped back below the 50-Day SMA (0.7320) to hold along the 100 (0.7286) and 200 (0.7282) period moving averages, and the pair may continue to trend sideways going into the Asian trade as the global economic docket remains fairly light. Nevertheless, as the Reserve Bank of New Zealand pledges to maintain the benchmark interest rate at the record-low going into 2010, the NZD/USD may hold a broad range over the remainder of the year as investors weigh the outlook for future policy however, a break below the monthly low at 0.7082 could lead the pair to retrace the advance from July as market participants scale back expectations for higher interest rates in New Zealand.

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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com

DailyFX provides forex news on the economic reports and political events that influence the currency market.
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