Daily Winners and Losers

New_Zealand_Dollar_At__Crossroads_Euro_To_Consolidate_Following_Failed_Test_Of_1.3500_body_ScreenShot035.png,

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

NZDUSD

0.7730

0.7748

0.7668

62

80

New_Zealand_Dollar_At__Crossroads_Euro_To_Consolidate_Following_Failed_Test_Of_1.3500_body_ScreenShot034.png,

The New Zealand dollar pared the decline from earlier this month to reach a high of 0.7748 on Monday, but the high-yielding currency may consolidate going into the Asian trade as the overnight rally remains overbought. The NZD/USD remains 60+ points higher on the day after moving 93% of its average true range, and the exchange rate may fill-in the gap from the 120-moving average at 0.7684 as the relative strength index falls back below 70. As the recent rally in the kiwi-dollar fails to push the pair back above 0.7800, we should see a corrective retracement unfold in the coming days, and the drop from the 2010 high (0.7975) may ultimately turn into a longer-term downtrend as the short-term rebound in the exchange rate tapers off. In turn, the technical developments that unfold later this week could reinforce a bearish outlook for the New Zealand dollar, and the NZD/USD may work its way back towards the 20-Day SMA at 0.7606 as it appears to be carving another top just below 0.7800.

Key Levels/Indicators

Level/Indicator

Level

10-Day SMA

0.7638

20-Day SMA

0.7606

50-Day SMA

0.7595

100-Day SMA

0.7517

Upcoming Events

GMT

Importance

Release

Expected

Prior

2:00

LOW

Non Resident Bond Holdings (DEC)

--

64.6%

Currency

Last

High

Low

Daily Change (pip)

Daily Range (pip)

EURUSD

1.3291

1.3415

1.3245

97

170

New_Zealand_Dollar_At__Crossroads_Euro_To_Consolidate_Following_Failed_Test_Of_1.3500_body_ScreenShot033.png,

The Euro pared the advance from the previous week, with the exchange rate slipping to a low of 1.3245, and the single-currency could face increased selling pressures over the next 24 hours of trading as European policy makers struggle to restore investor confidence. The EUR/USD is nearly 100 pips lower from the open after moving 119% of its daily ATR, and the pair may continue to push lower as the recent rally fails to produce a test of the December high at 1.3497. As price action remains capped by the 50.0% Fibonacci retracement from the 2009 high to the 2010 low around 1.3500, the euro-dollar should continue to retrace the sharp rally from the previous week, and the exchange rate may selloff going into the Asian trade as European policy makers maintain a lackadaisical approach in addressing the sovereign debt crisis. In turn, the risk for contagion is likely to intensify going forward, and the single-currency is likely to face increased headwinds over the near-term as market participants speculate Spain and Portugal to share Ireland's ill fate.

Key Levels/Indicators

Level/Indicator

Level

100-Day SMA

1.3416

50-Day SMA

1.3297

20-Day SMA

1.3170

200-Day SMA

1.3068

Upcoming Events

GMT

Importance

Release

Expected

Prior

10:00

MED

German ZEW Survey (Economic Sentiment) (JAN)

7.0

4.3

10:00

MED

German ZEW Survey (Current Situation) (JAN)

83.7

82.6

10:00

MED

Euro-Zone ZEW Survey (Economic Sentiment) (JAN)

16.6

15.5

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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com

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