The Australian dollar is the best-performing currency against the greenback on Wednesday, with the exchange rate pushing to a high of 0.9171, and the high-yielding currency may continue to appreciate going into the Asian trade as it benefits from the rise in risk appetite. The AUD/USD remains nearly 50pips higher on the day after moving 74% of its daily ATR, and we may see the pair extend the near-term rally carried over from the end of December as risk trends continue to dictate price action in the foreign exchange market. However, as the 30-minute RSI approach overbought territory, we may see price action hold below 92.00 and cover the gap from the 120-SMA at 0.9106 going into the Asian session. At the same time, the slew of Australian data due out on Thursday is likely to move the exchange rate as investors weigh the outlook for future policy, and expectations for higher interest rates may keep the pair bid throughout the first-half of 2010 as the Reserve Bank of Australia aims to normalize policy this year.
The Japanese Yen halted its two-day rally against the U.S. dollar, and remains the weakest of the majors as investors move into higher-yielding currencies. The USD/JPY is currently 90+pips higher on the day and crossed back above the 10-Day SMA (90.84) to reach a high of 92.67 after moving nearly 130% of its average true range, and the pair looks poised to test the 200-Day SMA at 93.56 for resistance as the near-term rally remains supported by the 20-Day at 90.84. However, as the daily RSI approaches 70, we may see the pair hold along the 240-SMA at 92.40 going into the Asian trade, and may continue to consolidate over the following week as investors weigh the prospects for a sustainable recovery. However, as the FOMC is scheduled to release its policy meeting minutes at 19:00 GMT, we could see the USD/JPY face increased volatility throughout the day as Fed Chairman Bernanke pledges to hold the benchmark interest rate at the record-low of 0.25% for an extended period of time.
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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
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