AUD/USD and NZD/USD Fundamental Analysis – Forecast for the Week of January 23, 2017
Both the Australian and New Zealand Dollars finished higher against the U.S. Dollar last week. The Aussie had the steadier climb. The Kiwi had the most volatile. The currencies seemed little rattled by stronger than expected U.S. economic data and hawkish comments from Fed Chair Janet Yellen although both posted potentially bearish signals on the daily chart shortly after Donald Trump’s inauguration as President of the United States.
The AUD/USD closed at .7552, up 0.0055 or +0.73%. The NZD/USD ended the week at .7164, up 0.0039 or +0.55%.
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U.S. economic news was bullish last week, led by monthly consumer inflation data which came in as expected at 0.3%. Annualized, the figure is 2.1%. This is above the Fed’s mandated 2.0% target for the first time since the summer of 2014. The solid data raises the odds of a Fed rate hike sooner-rather-than-later.
Last week, Trump helped weaken the U.S. Dollar when he said he thought it was “too strong”. Yellen’s comments generated a two-sided trade in the Greenback. At first she made hawkish comments supporting multiple rate hikes then she helped pressure the U.S. currency when she said the Fed would remain cautious about raising rates.
The New Zealand Dollar received support from a 0.6% gain in the GDT Price Index. Traders also liked the news that S&P Corp raised New Zealand’s credit rally to AA.
In Australia, the Employment Change report showed the economy added 13.5K jobs in December. This was above the 10.2K estimate, but below the 37.1K estimate. The Unemployment Rate, however, rose from 5.7% to 5.8%.
Forecast
Friday’s price action indicates we may see downside pressure early in the week. The reversal top chart pattern on the daily chart suggests traders may have used Trump’s inauguration as an excuse to book profits. It may also mean that investors are worried about Trump’s plans to protect America’s interests by rewriting trade deals and applying new tariffs.
On the economic front, Australian investors will get the opportunity to react to the latest consumer inflation numbers are Wednesday at 0030 GMT. The CPI report is expected to show a 0.7% rise. Trimmed Mean CPI is expected to come in at 0.5%.
On Wednesday at 2145 GMT, New Zealand will report its quarterly CPI figures. Look for a 0.3% rise.
This week’s key reports from the U.S. include Quarterly Advance GDP, which is expected to come in at 2.1%, down from 3.5%. Core Durable Goods Orders are expected to rise 0.5%.