Short-Term Technical Outlook on NZD/JPY

07/16/2009 12:01 am EST

Focus: FOREX

The New Zealand dollar strengthened against the Japanese yen during the last two days of trading and continues to retrace the selloff from the previous week following the rebound in risk appetite. NZD/JPY may continue to hold a broad range over the near term as investors weigh the outlook for future growth.

Currency Pair: NZD/JPY
Chart: 60-minute charts
Short-Term Bias: Flat

After reaching a high of 74.59 on 9/8, the kiwi-yen slid to a low of 44.23 in February as traders curbed their appetite for higher risk/reward investments, however, the rebound in market sentiment during the first half of the year has helped to drive demands for carry trades, and the high-yielding currency may continue to advance against its major counterparts as market participants anticipate the Reserve Bank of New Zealand to tighten policy over the next 12 months.

At the same time, fears of a protracted downturn in the global economy, paired with the slump in commodity prices, may continue to drag the NZD/JPY lower over the near term as the low-yielding currencies continue to benefit from safe-haven flows, and we may see the pair attempt to retrace the rally from the beginning of the year as risk appetite wanes. Over the next few hours of trading, we may see the pair continue to advance on the back of higher commodity prices, however, as the RSI approaches overbought territory, gains are likely to be capped and the pair may fall back below 59.40-50 (50.0% Fib) to fill in the gap from the 120-period SMA.

By David Song, Currency Analyst,


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