New Zealand Dollar Pares Previous Day’s Decline, Japanese Yen Continues to Underperform
The New Zealand dollar retraced the sharp decline from the previous day after finding near-term support at the 200-Day SMA (0.7001), and is currently the best forming currency against the greenback as the exchange rate crosses back above the 10-Day SMA (0.7072) to a high of 0.7102. The NZD/USD remains 68pips higher on the day after moving nearly 111% of its ATR, but the overnight advance appears to be tapering off as the 30-minute RSI fall back from oversold territory. As a result, the kiwi-dollar may continue its descend from the daily high and fall back towards the 240-SMA at 0.7066, but a break below the 120-SMA (0.7044) is likely to expose the 50-Day SMA at 0.7035, which could lead the pair to maintain its current range going into the following week. Nevertheless, the Reserve Bank of New Zealand is widely expected to hold the benchmark interest rate a 2.50 at their meeting next month, but Credit Suisse overnight index swaps are up 179bp this week from 145bp earlier this month, and the rise in interest rate expectations may continue to support the NZD/USD over the near-term as investors weigh the prospects for future policy.
The Japanese Yen extended the decline from the previous day, with the exchange rate rising to a fresh monthly high of 92.71, and the USD/JPY may continue to push higher going into the Asian trade as it breaks out of the downward trend from the 2007 high (124.13). The dollar-yen remains 20pips higher from the open after moving 98% of its average true range, but the bearish divergence in the 30-minute RSI could lead to a corrective retracement following the 230+pip rally over the last two-days of trading. At the same time, the daily RSI has jumped to 69 following the advance, and we may see the momentum behind the rally taper off as we head into the weekend.
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