The Japanese yen remained the best performing currency against the greenback, with the exchange rate slipping to an eight-month low of 88.24 during the Asian trade, while the New Zealand dollar lost ground following the rise in risk aversion.
The Japanese yen remained the best performing currency against the greenback, with the exchange rate slipping to an eight-month low of 88.24 during the Asian trade however, the overnight decline looks to have lost steam after moving nearly 150% of its daily ATR. The low-yielding currency continued to benefit from the rise in risk aversion, and the dollar-yen may continue to trend lower following the slump in market sentiment but nevertheless, as the USD/JPY remains oversold on the daily chart, we are likely to see the pair push higher throughout the U.S. session as equity and commodity prices push higher. As a result, the pair is likely to bounce back from the intraday low to fill-in the gap from the 100-period SMA at 90.11, and we may see the pair work test for near-term resistance over the week before it continues to trend lower.
The New Zealand dollar weakened against the greenback, with the NZD/USD slipping below the 10-Day SMA (0.7136) to reach a low of 0.7114 during the European trade however, the pair is likely to maintain the rising trend from March as investors anticipate the Reserve Bank of New Zealand to tighten policy over the next 12-months. It seems as though we’re seeing a slight correction as the kiwi-dollar remains well supported by the 20-Day moving average, and the pair may continue to trend higher over the week as investors ramp up speculation for higher interest rates in New Zealand. As a result, we may see the NZD/USD work its way back towards the 200-period SMA at 0.7196 as global commodity prices push higher, and the rise in the interest rate outlook may lead the retrace the sell-off from the previous year as the economy emerges from the recession.
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[I]To discuss this report contact David Song, Currency Analyst: <[email protected]>[/I]