Currencies Forecast: Interest Rate Differentials Drive US Dollar Resilience

USD/JPY Technical Analysis

The US dollar has fallen against the Japanese yen pretty significantly during the early part of the Friday session, but we’ve already seen the market turn right back around and bounce from just above the 161 yen level.

This is a sign where it looks like the market is going to continue to see a bit of resiliency here, and I do think that it’s probably going to be a scenario where we try to get back to the 163 yen level and then, I think, eventually break above there as we are seeing a major interest rate differential play out here and, of course, the US dollar has been strong in general.

AUD/USD Technical Analysis

The Australian dollar broke above the 0.6950 level but gave back those gains to show signs of hesitation. This is a market that I’ve been watching for a while, waiting to see whether or not it could actually break out, and it doesn’t look like it has the momentum yet. I think we stay in this short-term range, perhaps opening up the possibility of short-term back-and-forth range-bound trading, but as things stand right now, I don’t really think this has a lot of opportunity, at least in the short term, for the market to make a big move. If it does break out to the upside, the 50-day EMA is right around the 0.70 level, and I think that gets very difficult to break above.

NZD/USD Technical Analysis

The New Zealand dollar has found itself struggling at the 50-day EMA. It now looks as if the 0.58 level will continue to be resistance. Remember, we are reacting to the idea that perhaps New Zealand will raise interest rates again, but the reality is they are still light years away from the Federal Reserve, and I think the reaction might have been more short-covering-based than anything else.

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