New Zealand Dollar Stalls Ahead of 50-Day SMA, Swiss Franc Weakens Across The Board

The New Zealand dollar pared the overnight decline and rallied to a high of 0.7124 on Monday following the rise in risk appetite, but the rebound appears to be losing steam as price action fails to cross back above the 50-Day SMA at 0.7128. The NZD/USD is 60points higher from the open after moving 104% of its daily ATR, and the exchange rate looks poised to fall back towards the 120-SMA at 0.7073 as the 30-minute RSI falls back from a high of 72. As a result, the kiwi-dollar may retrace the advance and fall back to the 100-Day SMA (0.7059) and test it for intraday support as risk appetite tapers off. However, the Reserve Bank of New Zealand’s gauge for inflation expectations is likely to spark increased volatility in the exchange rate going into the Asian trade as investors weigh the outlook for future policy, and another rise in the index could spark a bullish reaction in the kiwi-dollar as investors increase speculation for a rate hike in September.

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The Swiss Franc lost ground against all of its major counterparts and is the weakest link against the greenback on Monday, and the low-yielding currency may continue to lose ground throughout the North American trade, which could lead the exchange rate to test the 20-Day SMA at 1.0452. The USD/CHF is 30+pips higher on the day after moving 67% of its average true range, and the dollar-franc certainly has room to push higher throughout the day, which could lead the exchange rate to pare the decline from the previous week. However, as the 30-minute RSI approaches overbought territory, price action may continue to hold along the 240-SMA at 1.0382 going into the Asian trade, but the bearish crossover in the 50 and 200-Day SMA’s suggests price action will track lower over the near-term as it retraces the advance from earlier this year.

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