The New Zealand dollar tipped lower against the greenback for the second day but remains little changed on the day after bouncing back from the intraday low (0.7076) while the British pound tumbled to break below the 20-Day moving average.
The New Zealand dollar tipped lower against the greenback for the second day and slipped to a low of 0.7076 during the European trade however, the pair has retraced most of the overnight decline and remains little changed on the day. As market liquidity thins ahead of the weekend, we are likely to see the NZD/USD hold steady throughout the U.S. trade however, as risk trends continue to dictate price action in the foreign exchange market, the rise in the equities market could drive demands for the higher-yielding currency as the daily price action accounts for roughly 50% of the ATR. However, as the kiwi-dollar continues to mark lower lows, with daily RSI holding at 66, the pair may continue to retrace the advance from earlier this week as the economic docket for the following week is expected to show a 0.2% contraction in 2Q GDP.
The GBP/USD weakened for the second day on the back of U.S. dollar strength and broke below the 20-Day SMA (1.6399) to reach a low of 1.6297, and the pair looks to be finding near-term support ahead of the 100-Day SMA at 1.6243. The British pound was boosted during the overnight following the less-than-expected rise in public borrowing, but looks to be coming back under pressure as investors continue to scale back long-term expectations for higher interest rates. Nevertheless, as the pair moves nearly 95% of the ATR, we are likely to see the GBP/USD hold above the 100-Day SMA, and the pound-dollar attempt to retrace the decline from early this week as the RSI pulls out of oversold territory. However, as market participants await the Bank of England Minutes due out next week, we may see Cable face increased selling pressures as the central bank maintains a cautious tone.
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[I]To discuss this report contact David Song, Currency Analyst: <[email protected]>[/I]