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Swiss Franc Benefits From Flight To Safety, New Zealand Dollar Eyes 0.7300

Swiss Franc Benefits From Flight To Safety, New Zealand Dollar Eyes 0.7300

2011-03-14 17:58:00
David Song, Currency Strategist
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Swiss_Franc_Benefits_From_Flight_To_Safety_New_Zealand_Dollar_Eyes_0.7300_body_ScreenShot008.png, Swiss Franc Benefits From Flight To Safety, New Zealand Dollar Eyes 0.7300

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

USDCHF

0.9230

0.9317

0.923

46

87

Swiss_Franc_Benefits_From_Flight_To_Safety_New_Zealand_Dollar_Eyes_0.7300_body_ScreenShot007.png, Swiss Franc Benefits From Flight To Safety, New Zealand Dollar Eyes 0.7300

The Swiss franc rallied across the board on Monday as the uncertainties surrounding the global economy dampened demands for higher yields, and the near-term rally in the safe-haven currency may gather pace throughout the North American trade as risk sentiment continues to drive price action in the foreign exchange market. The USD/CHF remains nearly 50 points lower from the open after moving 78% of its average true range, and pair may make another run at 0.9200 as the franc benefits from safe-haven flows.

With price action capped by the 20-Day SMA at 0.9352, the dollar- franc should maintain the narrow range from earlier this month, and there could be an opportunity to take advantage of the sideways price action in the dollar-franc if we see the pair find support around 0.9200. However, with the Swiss National Bank scheduled to announce its interest rate decision later this week, the USD/CHF is likely to face increased volatility over the coming days, and there could be a bullish breakout in the USD/CHF if the central bank weighs alternative measures to stem the marked appreciation in the local currency.The SNB may see scope to intervene in the currency market again as policy makers maintain a cautious outlook for the real economy, and the central bank may take additional steps to promote global trade as it aims to encourage a sustainable recovery.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.9484

20-Day SMA

0.9352

10-Day SMA

0.9284

2011 Low

0.9201

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

NZDUSD

0.7395

0.7448

0.7363

37

85

Swiss_Franc_Benefits_From_Flight_To_Safety_New_Zealand_Dollar_Eyes_0.7300_body_ScreenShot006.png, Swiss Franc Benefits From Flight To Safety, New Zealand Dollar Eyes 0.7300

The New Zealand dollar pared the sharp rally from Friday, with the exchange rate falling back to 0.7363, and the high-yielding currency should continue to trend lower over the near-term as it maintains the downward trending channel carried over from the previous month. The NZD/USD is nearly 40pips lower from the open after moving 106% of its ATR, and the pair may consolidate over the next 24-hours of trading as the pair bounces off of the 120-SMA at 0.7371. However, as price action remains capped by the 20-Day SMA at 0.7464, the pair may make another run at 0.7300, and risk sentiment should drive price action going into Tuesday as the economic docket remains fairly light for the beginning of the week. Nevertheless, investors see the Reserve Bank of New Zealand raising the cash rate by 25bp over the next 12-months after delivering a one-time 50bp rate cut last week, but the central bank may curb speculation for higher borrowing costs as the devastating earthquake in the Asia/Pacific region dampens the outlook for global trade. In turn, the bearish sentiment underlying the New Zealand dollar may gather pace going forward, and the selloff in the exchange rate may accelerate in the coming days as fears surrounding the global economy bears down on market sentiment.

Key Levels/Indicators

Level/Indicator

Level

20-Day SMA

0.7464

200-Day SMA

0.7402

10-Day SMA

0.7398

2011 Low

0.7322

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

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