The New Zealand dollar halted the four-day decline and rose to a high of 0.7073, and is the best performing currency against the greenback on Monday following the rebound in risk appetite. The NZD/USD remains nearly 30pips higher of the day after moving only 57% of its ATR, and the higher-yielding currency may continue to push higher going into the Asian trade as risk trends continue to dictate price action in the foreign exchange market. However, as the overnight advance fails to retrace Friday’s decline, with the intraday RSI falling back from a high of 68, we may see price action trade along the 120-SMA at 0.7050 throughout the North America trade. Nevertheless, as the kiwi-dollar maintains the downward trending channel from the 2009 high (0.7636), we may see the pair fall back below the 0.7000 level over the week, and may test the 200-Day SMA (0.6838) for near-term support later this month.
The Japanese Yen extended its decline against the greenback following the better-than-expected U.S. data, and the low-yielding currency may continue lose ground throughout the North American trade as economic outlook for the world’s largest economy improves. The USD/JPY remains nearly 80pips higher on the day after moving 69% of its average true range, but we may see the overnight rally taper off going into the Asian trade as the 30-minute RSI climbs deeper into overbought territory. As a result, we could see price action hold below the 20-Day SMA at 91.05, but a break to the upside may lead the pair to retrace the decline from earlier this month. Nevertheless, as the Fed aims to normalize policy this year, we are likely to see the U.S. dollar lose its dominance as a fund-currency, which will certainly weigh on the Japanese yen as market participants speculate the Bank of Japan to keep the benchmark interest rate at 0.10% throughout the year.
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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
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