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Swiss Franc Benefits From Flight To Safety, New Zealand Dollar Struggles To Hold Ground Ahead Of RBNZ

Swiss Franc Benefits From Flight To Safety, New Zealand Dollar Struggles To Hold Ground Ahead Of RBNZ

2011-03-09 16:59:00
David Song, Currency Strategist
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Daily Winners and Losers

Swiss_Franc_Benefits_From_Flight_To_Safety_New_Zealand_Dollar_Struggles_To_Hold_Ground_Ahead_Of_RBNZ_body_ScreenShot030.png, Swiss Franc Benefits From Flight To Safety, New Zealand Dollar Struggles To Hold Ground Ahead Of RBNZ

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

USDCHF

0.9305

0.9369

0.9269

47

100

Swiss_Franc_Benefits_From_Flight_To_Safety_New_Zealand_Dollar_Struggles_To_Hold_Ground_Ahead_Of_RBNZ_body_ScreenShot031.gif, Swiss Franc Benefits From Flight To Safety, New Zealand Dollar Struggles To Hold Ground Ahead Of RBNZ

The Swiss Franc rallied across the board on Wednesday following a flight to safety, and the rebound in the low-yielding currency may gather pace going into the end of the week as fears surrounding the European debt crisis intensifies. The USD/CHF remains nearly 50pips lower from the open after moving 109% of its average true range, but the pair may consolidate going into the Asian trade as the relative strength index bounces back from a low of 17. In turn, the dollar-franc looks poised to hold along the 120-SMA (0.9301) throughout the day, and the exchange rate may trend sideways ahead of the EU Summit later this week as the group weighs different alternatives to restore investor confidence. However, as European policy makers struggle to meet on common ground, the lack of coordination to address the debt crisis may bear down on market sentiment, and the Swiss franc may continue to outperform against its major counterparts as it benefits from safe-haven flows.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.9487

20-Day SMA

0.9415

10-Day SMA

0.9280

2011 Low

0.9201

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

NZDUSD

0.7383

0.7417

0.7379

12

38

Swiss_Franc_Benefits_From_Flight_To_Safety_New_Zealand_Dollar_Struggles_To_Hold_Ground_Ahead_Of_RBNZ_body_ScreenShot029.png, Swiss Franc Benefits From Flight To Safety, New Zealand Dollar Struggles To Hold Ground Ahead Of RBNZ

The New Zealand dollar pared the overnight advance ahead of the Reserve Bank of New Zealand interest rate decision at 20:00 GMT, and the high-yielding currency may face additional selling pressures going into the Asian trade as market participants speculate the central bank to lower the cash rate to 2.75% in March. The NZD/USD is 10+points lower on the day after moving only 50% of its ATR, and the exchange rate may hold along the 200-Day SMA (0.7392) ahead of the announcement as investors weigh the prospects for future policy. As market participants see a risk for another round of monetary easing, dovish comments from the RBNZ could spark a sharp selloff in the kiwi-dollar, and the exchange rate may make another run at 0.7300 as it holds within the downward trending channel carried over from the previous month. However, if the central bank surprises the market and unexpectedly keeps the cash rate at 3.00%, the near-term correction in the exchange rate should gather pace going into the end of the week, and the NZD/USD may work its way back towards 0.7500, the 78.6% Fibonacci retracement from the 2008 high to the 2009 low, as the relative index bounces back ahead of oversold territory.

Key Levels/Indicators

Level/Indicator

Level

78.6% Fib

0.7500

10-Day SMA

0.7433

200-Day SMA

0.7392

Daily RSI

36

Upcoming Events

GMT

Importance

Release

Expected

Prior

20:00

HIGH

Reserve Bank of New Zealand Interest Rate Decision

2.75%

3.00%

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

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