AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Pressured by RBA Intervention, Weak Trade Balance
Support for the Australian and New Zealand Dollars continued to erode on Wednesday as investors reacted to the Reserve Bank of Australia’s attempt drive down the currency through an aggressive intervention and the weaker-than-expected employment report from New Zealand.
The AUD/USD settled at .7967, down 0.0002 or -0.02% and the NZD/USD closed at .7429, down 0.0038 or -0.51%.
Earlier in the week, Reserve Bank governor Philip Lowe warned that the strength of the dollar was becoming a brake on GDP growth, inflation and jobs might be at risk.
“The higher exchange rate is expected to contribute to subdued price pressures in the economy. It is also weighing on the outlook for output and employment,” Dr. Lowe said.
Traders showed little reaction to Dr. Lowe’s comments so the RBA had to come in with more fire power. That firepower was an intervention. The currency traded lower after the move. If the Aussie doesn’t start to retreat substantially over the near-term then traders should look for the RBA to repeat the process.
Although Goldman Sachs issued a sell signal late last week, Australian Dollar bulls are being stubborn about giving back their gains. So the RBA may have to take matters into their own hands until the bullish investors get the message.
The New Zealand Dollar took a hit after the Employment Change report came in well under expectations. Traders sold the NZD/USD after they reduced bets for an earlier than expected rate hike by the Reserve Bank of New Zealand.
Forecast
Sellers are continuing to drive the AUD/USD and NZD/USD lower on Thursday in reaction to the aforementioned fundamental events. The Aussie is also attracting additional selling pressure due to the weaker-than-expected Trade Balance data. In New Zealand, the ANZ Commodity Prices report showed an unexpected decline of 0.8%.
The Australian Dollar is under pressure because the trade balance fell short of market forecasts. Additionally, exports with China fell by 1%, with the value of shipments hitting their lowest level for the year. Finally, a drop in front-end government bond yields means investors are reducing the chances of an RBA rate hike.
On Thursday, AUD/USD and NZD/USD investors will be watching a series of fresh economic reports from the U.S. because of their potential impact on the Greenback. Anything that supports a weakening economy or lowers the chances for a Fed rate hike, could pressure the U.S. Dollar.
Today’s reports include Challenger Job Cuts, Weekly Unemployment Claims, Final Services PMI, ISM Non-Manufacturing PMI and Factory Orders. The most important report is the ISM Non-Manufacturing PMI. It is expected to come in at 56.9, below the previous 57.4 read.
The current price action in the AUD/USD and NZD/USD suggest that the long-awaited correction may be just beginning.
This article was originally posted on FX Empire
