The New Zealand dollar surged higher against the greenback to reach a fresh yearly high of 0.7244 and overnight rally looks to be overdone as daily price action exceeds the ATR by two-folds, while the Canadian dollar continues to lose its footing following the unexpected drop in retail sales.
The New Zealand dollar surged higher against the greenback to reach a fresh yearly high of 0.7244 following an unexpected surplus in the current account, and the NZD/USD may continue to push higher throughout the North American trade as investors raise their appetite for higher yielding assets. However, the kiwi-dollar has moved nearly 200% of its daily average true range, with the daily RSI rising to 71 following the 150+pip rise, and the overnight rally looks to be losing steam as economists forecast New Zealand’s growth rate to contract 0.2% in the second-quarter. Nevertheless, the rebound in trade account encourages an enhanced outlook for the growth report due out at 22:45 GMT today, and an unexpected expansion in 2Q GDP is likely to drive the exchange rate higher as the Reserve Bank of New Zealand anticipates economic activity to improve throughout the second-half of the year.
The Canadian dollar retraced the two-day decline against the greenback, with the USD/CAD falling back to a low of 1.0661 during the overnight session however, the unexpected drop in retail sales looks to be dragging on the exchange rate as investors weigh the prospects for a sustainable recovery in the world’s eighth largest economy. Nevertheless, the dollar-loonie continued to hold below the 10-Day moving average (1.0738) and has moved nearly 95% of its daily ATR going into the U.S. trade, and the pair is likely to hold a narrow range over the next 24 hours of trading as market participants await the FOMC interest rate decision due out at 18:15 tomorrow. As the USD/CAD continues to hold the broad range from the end of July, the pair may work its way back above the 20-Day (1.0833) and 50-Day (1.0876) moving averages as market participants speculate the Fed to signal an end to its emergency programs however, dovish commentary following the rate decision may lead the pair to test the yearly low at 1.0589. At the same time, the 50-Day SMA continues to approach the 20-Day, with the 100-Day moving in tandem, and the downward trend in the moving averages continues to favor a bearish outlook for the pair.
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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
