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Dollar Pares Gains - Kiwi Surges on Rate Expectations

Dollar Pares Gains - Kiwi Surges on Rate Expectations

2011-05-24 14:07:00
Michael Boutros, Technical Strategist
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Daily Winners and Losers

Dollar_Pares_Gains_-_Kiwi_Surges_on_Rate_Expectations_body_Picture_2.png, Dollar Pares Gains - Kiwi Surges on Rate ExpectationsDollar_Pares_Gains_-_Kiwi_Surges_on_Rate_Expectations_body_Picture_3.png, Dollar Pares Gains - Kiwi Surges on Rate ExpectationsDollar_Pares_Gains_-_Kiwi_Surges_on_Rate_Expectations_body_Picture_4.png, Dollar Pares Gains - Kiwi Surges on Rate Expectations

The New Zealand dollar topped the performance charts against the greenback in overnight trade, advancing nearly 1% as a rally in commodities and stocks stoked demand for higher-yielding assets. The gains come on the heels of a steep sell-off yesterday that saw US equities plummet more than 1% across the board. The kiwi’s gains were triggered by a central bank report that showed executives had raised their inflation expectations, fueling speculation that the Reserve Bank of New Zealand will move on interest rates. The NZD/USD pair broke through interim resistance at the 0.7920 before leveling off just above the 0.80-handle. Interim support rests at the 0.7970 level, with subsequent floors eyed at 0.7920 and 0.7860. Topside targets are eyed at the 0.80-handle, backed by 0.8020 and 0.8060. With no data on the kiwi economic docket this week, price actions will be dictated by swings in risk appetite, with Monday’s loss’s keeping traders on edge.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

0.7793

20-Day SMA

0.7937

10-Day SMA

0.7899

2011 High

0.8120

Dollar_Pares_Gains_-_Kiwi_Surges_on_Rate_Expectations_body_Picture_5.png, Dollar Pares Gains - Kiwi Surges on Rate ExpectationsDollar_Pares_Gains_-_Kiwi_Surges_on_Rate_Expectations_body_Picture_6.png, Dollar Pares Gains - Kiwi Surges on Rate Expectations

The Japanese yen continued to slide overnight, breaching the 82-figure early in per-market trade. With risk appetite creeping back into markets, the allure of the safe-haven continues to slowly lose its luster. With the Japanese economy falling back into recession, the yen may continue to see pressure in the coming days if market appetite persists. The USD/JPY pair continues to trade within the ascending channel that dates back to May 5th. Topside targets are eyed at 82.20 backed by 82.40, with interim support resting at the 23.6% Fibonacci extension taken from the March 16th and May 5th troughs at 81.70. Subsequent floors are seen at 81.50 followed by 81.30. Traders will be eyeing trade balance figures overnight with consensus estimates calling for steep declines in domestic exports. A weaker than anticipated print here could see further losses for the battered yen.

Key Levels/Indicators

Level/Indicator

Level

50-Day SMA

81.97

20-Day SMA

81.16

10-Day SMA

81.40

2011 High

85.51

Upcoming Events

Date

GMT

Importance

Release

Expected

Prior

5/24

23:50

MEDIUM

Adjusted Merchandise Trade Balance (Yen) (APR)

-695.9B

96.3B

5/24

23:50

MEDIUM

Merchandise Trade Balance Total (Yen) (APR)

-703.7B

196.5B

5/24

23:50

LOW

Merchandise Trade Exports (YoY) (APR)

-12.7

-2.2

5/24

23:50

LOW

Merchandise Trade Imports (YoY) (APR)

12.8

11.9

Written by Michael Boutros, Currency Analyst for DailyFX.com

To contact the author of this report, please send inquiries to:mboutros@dailyfx.com

You can also follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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