New Zealand dollar pulls back from daily resistance; yen rally stalls

DailyFX forex winners and losers

The New Zealand dollar is the top performer against a weaker greenback in early US trade with an advance of 0.71% on the session. The kiwi has remained range bound for over a month now with key daily resistance eyed at the confluence of channel resistance and the 23.6% Fibonacci retracement taken from the December 15th advance at 8230 backed closely by the 50-day moving average at 8250. Strong daily support rests with the confluence of the 200-day moving average and the 38.2% retracement at 8085. We remain neutral at these levels pending a break out of the current range while noting that our long-term outlook remains weighted to the downside.

The scalp chart shows the magnitude of today’s advance with the kiwi failing an attempt at a breach above the 61.8% Fibonacci extension taken from the March 29th and April 4th troughs at 8215. Interim resistance holds here with a breach eyeing soft targets at 8225 and the 78.6% extension at 8240. Look for the kiwi’s advance to soften in New York trade with a break back below the 50% extension at 8197 eyeing targets at the 38.2% extension at 8180 and the 23.6% extension at 8160. Note that we remain on the sideline so long as RSI remains within the confines of the ascending channel formation with a break below channel support triggering short entries.

Key Levels/Indicators

Level/Indicator

Level

200-Day SMA

0.8095

100-Day SMA

0.8037

50-Day SMA

0.8252

2012 NZD HIGH

0.8470

The Japanese yen is the weakest performer against the dollar with the pair advancing more than 0.30% in early trade. The USD/JPY rebounded off channel support dating back to March 23rd in overnight trade before stalling around the 81-handle. While the correction in the yen has been larger than anticipated, we maintain our long-term bullish bias with the recent pullback offering favorable long entries. The pair has continued to trade within the confines of a descending channel formation dating back to March 21st with interim support eyed at the 123.6% Fibonacci extension taken from the March 21st and April 1st crests at 80.67 backed by channel support and the 138.2% extension at 80.37. Topside resistance targets are held at the 100% extension at 81.20, 81.40, and the 78.6% extension at 81.63. A breach above the 82-handle would alleviate some of the downward pressure on the pair with such a scenario challenging channel resistance, currently around the 38.2% extension at 82.50. Bottom line- look for price action to signal the completion of the correction with a breach above channel resistance offering further conviction on our directional bias.

Key Levels/Indicators

Level/Indicator

Level

200-Day SMA

78.22

100-Day SMA

79.11

50-Day SMA

80.87

2011 JPY HIGH

75.50

 

About the Author
Michael Boutros

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
WEB: www.DailyFX.com

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