AUD/USD and NZD/USD Fundamental Forecast – December 5, 2016
The Australian and New Zealand Dollars posted gains on Friday as investors reacted positively to the mixed U.S. Non-Farm Payrolls report. Portions of the jobs report came in weaker than expected, suggesting the labor market is not heating up as fast as previously indicated. Although this will not take a December rate hike off the table, it will likely mean the Fed may have to limit the number of future rate hikes in 2017.
U.S. Treasury yields declined after the release of the jobs report, boosting demand for the Aussie and Kiwi, while making the U.S. Dollar a less desirable investment.
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The AUD/USD finished at .7450, up 0.0037 or +0.50%. The NZD/USD closed at .7134, up 0.0048 or +0.68%.
Forecast
I’m not sure how much of an influence the resignation of the Italian Prime Minister will have on the Aussie and the Kiwi, but I suspect the direction of the markets will be determined by whether there is huge safe-haven demand for the U.S. Dollar, or the dumping of higher-yielding assets like stocks. It may not have any influence on the two currencies either.
Early price action suggests that investors aren’t sure how to play the event either.
In Australia, the AIG Services Index came in at 51.5, up from the previous 50.5. MI Inflation was slightly lower than previously reported at 0.1%. Company Operating Profits came in at 1.0%, below the 3.1% estimate and the previous 6.5%. The ANZ Job Advertisements indicator rose 1.7%.
In New Zealand, ANZ Commodity Prices rose 2.7%, up from the previous 0.7%.
The major report from the U.S. is the ISM Non-Manufacturing PMI report. It is expected to come in at 55.3.
The Caixin Services PMI report from China came in better than expected at 53.1. This beat the estimate and the previous read. The news helped support the Australian and New Zealand Dollars.
If there is upside momentum today then AUD/USD buyers will go after last week’s high at .7497. Taking out this level could trigger an eventual rally into the primary upside target at .7544 to .7599.
The key level to watch in the NZD/USD is .7080. Holding above this level will indicate the presence of buyers. The primary upside objective is .7186 to .7237. Reaching this area would suggest a collapse by the U.S. Dollar. A break under .7080 will signal that sellers have returned.