New Zealand Dollar Tests 200-Day SMA, Japanese Yen Lags Behind

The New Zealand pared the decline from earlier this week and rallied to a high of 0.7090 on Thursday following the rebound in market sentiment, and the high-yielding currency may continue to push higher throughout the day as investors raise their appetite for risk. The NZD/USD is nearly 50 points higher from the open after moving 112% of its average true range, but the lack of momentum to hold above the 200-Day SMA at 0.7086 could lead the kiwi-dollar to retrace the overnight advance. At the same time, with the 30-minute RSI pulling back from overbought territory, there could be a corrective retracement going into the Asian trade, which could lead price action to fall back below the 120-SMA at 0.7023.

Key Levels/Indicators

The Japanese Yen weakened across the board and is the worst performing currency against the greenback, and the low-yielding currency may continue to underperform throughout the day as market sentiment improves. The USDJPY remains slight higher on the day after moving only 55% of its ATR, and the pair may hold a narrow range going into the Asian trade as the exchange rate bounces back from a 15-year low. As a result, price action may trade along the 120-SMA at 84.47, but a break above the 240-SMA at 84.90 could lead the pair to test the 20-Day SMA at 85.52. As the daily RSI bounces back from 30, we may see the dollar-yen continue to retrace the sharp decline from earlier this week, but if price action fails to break above the 20-Day SMA, the exchange rate may hold the descending triangle from June, which could lead the pair to test the yearly low at 83.58 in the days ahead.

Key Levels/Indicators

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