New Zealand Dollar Benefits From Risk Appetite, British Pound Halts Two-Day Rally

The New Zealand dollar continued to appreciate during the overnight trade and is the best-performing currency against the greenback on Tuesday, and the exchange rate may continue to push higher throughout the day as investors increase their appetite for risk. The NZD/USD is 35points higher from the open after moving 80% of its daily ATR, and the pair may continue to retrace the sharp decline from the previous week as price action crosses back above the 50-Day SMA at 0.7108. However, as the 30-minute RSI approaches overbought territory, the kiwi-dollar may hold along the 120 SMA at 0.7076 throughout the European trade, but the rebound in risk sentiment could push the pair above the 240-SMA at 0.7122 later today as equity futures foreshadow a higher open for the U.S. market.

Key Levels/Indicators

The British Pound halted the two-day rally and fell back from a high of 1.5696, but the U.K. currency is likely to face increased volatility over the next 24 hours of trading as the Bank of England is scheduled to release its policy meeting minutes on Wednesday at 8:30 GMT. The GBP/USD is slightly lower on the day after moving only 47% of its average true range, but the pair appears to be finding intraday support ahead of the 120-SMA at 1.5616, which could lead the exchange rate to hold along the 20-Day SMA at 1.5663. However, as the economic docket is expected to reinforce an weakening outlook for inflation, a break below the 120-SMA could lead the pair to test the 200-Day SMA at 1.5504 for near-term support, but the pound-dollar looks poised to retrace the decline from the previous week as it maintains the upward trending channel from the June low (1.4346).

Key Levels/Indicators

Upcoming Events

Join us to discuss the outlook for the major currencies on the DailyFX Forums

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