New Zealand Dollar Continues to Outperform, Euro Lags Behind
The New Zealand dollar continued to benefit from the rise in risk appetite and remains the best performing currency against the greenback on Wednesday, but the overnight rally appears to be tapering off as the 30-minute RSI falls back from a high of 77. The NZD/USD is currently 60pips higher from the open after moving 87% of its daily ATR, and we may see the exchange rate pull back heading into the Asian trade and close the gap from the 120-SMA at 0.7064. However, if the kiwi-dollar maintains the advance and close above the 100-Day at 0.7156, we may see the pair continue to retrace the decline from earlier this year and test the January high at 0.7440. Nevertheless, as the Reserve Bank of New Zealand continues to hold a cautious outlook for the economy and pledges to hold the cash rate at the record-low throughout the first-half of 2010, dovish comments from the central bank would certainly drag on the NZD/USD as investors weigh the prospects for a rate hike later this year.
The Euro pared the overnight advance after rising to a high of 1.3818, and the single currency may test the lower bounds of its recent range over the remainder of the week as price action continues to hold below the 50-Day SMA at 1.3865. The EUR/USD is 10+pips lower on the day after moving only 70% of its average true range, and we may see price action hold above the 120-SMA (1.3726) going into the Asian trade as the 30-minute RSI bounces back from oversold territory. Nevertheless, the European Central Bank is widely expected to hold the benchmark interest rate at 1.00% next month even as the Governing Council prepares to unwind its emergency programs, and the central bank is likely to keep borrowing costs on hold going into the second-half of the year as price pressures remain subdued.
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