The New Zealand dollar rallied to a fresh yearly high against the greenback as the $128B economy emerged from the recession in the second quarter, while the Japanese Yen weakened across the board, with the USD/JPY climbing back above the 10-Day moving average ahead of the FOMC interest rate decision.
The New Zealand dollar rallied to a fresh yearly high against the greenback as the $128B economy emerged from the recession in the second quarter, and the pair may continue to trend higher over the week as it remains well supported by the 10-Day moving average at 0.7099. After moving 130% of its daily ATR, the NZD/USD continued to lose ground and is up 31 pips from the open even thought the pair remains overbought, and we may see the exchange rate continue to trend lower throughout the US trade as investors speculate the Federal Reserve to signal an end to its emergency programs. Nevertheless, as the 30-minute RSI falls toward oversold territory, the pair should continue to hold above yesterday’s close (0.7189) ahead of the Fed’s announcement however, the pair may have reached a near-term top as Fed Chairman Ben Bernanke sees the world’s largest economy emerging from the worst recession since the post-war period.
The Japanese yen lost ground across the board, with the USD/JPY crossing back above the 10-Day SMA (91.22) to reach a high of 91.37, and the pair may continue to retrace the sell-off from earlier this month if the FOMC holds an improved outlook for the economy. The dollar-yen is up 27pips from the open after moving more than 100% of its daily average true range, and the overnight advance looks to have lost steam as the intraday RSI approaches 70. As a result, we are likely to see the exchange rate hold along the 100 and 200 period SMA’s ahead of the rate decision as investors speculate the Fed to conclude its emergency programs. Nevertheless, as the USD/JPY fails to close above the 20-Day SMA (92.04) for the second time this week, we may see pair continue to hold the downtrend from April if the Fed decides to extend its asset purchase scheme, and the pair is likely to fall back towards the monthly low to test for near-term support.
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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
