The Australian and New Zealand Dollars are under pressure on Monday, continuing the sell-off that began on Friday with the release of stronger-than-expected U.S. Non-Farm Payrolls and factory activity data. Traders are saying, however, that the Federal Reserve’s monetary policy outlook and thinned holiday trading in Asia may be limiting losses.

At 09:56 GMT, the AUD/USD is trading .7230, down 0.0017 or -0.23% and the NZD/USD is at .6892, down 0.0001 or -0.02%.

To recap, jobs data on Friday showed that the U.S. economy created 304,000 jobs in January, the highest in 11 months, and above street estimates, although December’s strong figure was revised lower to 222,000. The unemployment rate increased slightly to 4.0% and average hourly earnings were marginally higher at 0.1%, below the forecast.

One reason for the selling pressure is that traders are shrugging their shoulders to concerns of a slowdown in the U.S. economy. This is leading investors to trim expectations the Fed would need to cut interest rates to support the economy later this year.

Higher Treasury yields are also making the U.S. Dollar a more attractive investment with the benchmark 10-year U.S. Treasury yield rising to 2.69 percent from a four-week low at 2.619, hit earlier last week.

Low volume may also be behind the long liquidation with China’s financial markets closed all week for the Lunar New Year holiday. Other Asian markets are also closed at different times of the week.

Australian News Dominates

The Aussie was also pressured by the release of weaker-than-expected buildings approvals data. The report came in at minus 8.4% and the previous month was revised downward to 9.8%. Traders were looking for a 2.1% increase.

ANZ Job Advertisements came in at minus 1.7%. December’s figures was also revised lower to minus 0.7%.

Traders are now gearing up for reports on Australian Retail Sales and Trade Balance. Afterwards, the Reserve Bank of Australia will release its interest rate and monetary policy decisions. The RBA is widely expected to keep its benchmark rate steady. The consensus says weakening economic data means the central bank should keep monetary policy accommodative.

According to CNBC, futures data imply around 50-50 chance the RBA will cut the 1.5 percent cash rate by the end of the year, despite its repeated assertions that the next move will be up.

Daily Forecast

The pressure should remain on both the Aussie and Kiwi throughout the session in today’s data starved session. Both are being driven lower by the upbeat U.S. data from Friday, with additional selling being fueled by the dovish outlook for the RBA and the potentially bearish chart pattern by the Kiwi.

Generally speaking, investors are pricing in the possibility the RBA tempers its recent optimistic outlook for the economy due to changing fundamentals, particularly the impact of the on-going trade dispute between the U.S. and China.

This article was originally posted on FX Empire

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