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AUD/USD and NZD/USD Fundamental Analysis – Forecast for the Week of October 17, 2016

By:
James Hyerczyk
Published: Oct 15, 2016, 15:49 UTC

The Australian and New Zealand Dollars moved in opposite directions last week. Both, at times, were under pressure due to rising U.S. Treasury yields, but

audusd

The Australian and New Zealand Dollars moved in opposite directions last week. Both, at times, were under pressure due to rising U.S. Treasury yields, but at the end of the week, the Aussie was supported by a better economy and greater demand for risky assets and the Kiwi was under pressure due to expectations of a November rate cut.

The AUD/USD finished the week at .7616, up 0.0031 or +0.40%. The NZD/USD closed down 0.0085, or -1.18% at .7083.

weekly-nzdusd
Weekly NZD/USD

There were no major reports last week out of Australia or New Zealand. In Australia, two reports – NAB Business Confidence and the RBA Financial Stability Review – had the most impact on the Aussie. Minor reports included Home Loans, Westpac Consumer Sentiment and MI Inflation Expectations.

In New Zealand, investors had the opportunity to react to only two minor reports, the Business NZ Manufacturing Index and the FPI report.

In Australia, according to NAB, business confidence remained above average, but expectations of subdued growth in 2018 means the Reserve Bank of Australia may cut interest rate two more times next year.

The highlight of the RBA Financial Stability Review was the central bank’s warning about the big banks’ exposure to inner-city apartment markets, saying the risk of a “marked oversupply” has increased significantly in some inner-city areas.

The RBA further warned that Australia’s banks risked “material losses” on their development lending if apartment markets deteriorate, and even greater exposure through their mortgage lending.

The Melbourne Institute and Westpac Bank survey rose for a third month in October as Australians became more optimistic about the economy and their own finances for the year ahead.

The New Zealand Dollar was under pressure most of the week after Reserve Bank Assistant Governor John McDermott gave a speech in which he reminded people that another cut to the Official Cash rate is likely.

FORECAST

weekly-audusd
Weekly AUD/USD

In the week ahead, the AUD/USD and NZD/USD will continue to be influenced by the direction of U.S. Treasury yields. The catalysts behind the price action in the U.S. Treasury market will be Consumer Price data on October 18, Building Permits on October 19 and the Philly Fed Manufacturing Index on October 20.

Domestically, in Australia, the RBA Monetary Policy Meeting Minutes will be released early Tuesday, followed by the Employment Change and Unemployment Rate reports on Thursday.

The Consumer Price report in New Zealand on October 18 should be a market mover. Investors are looking for the report to show 0.0% growth.

The biggest outside influence this week for the two currencies is likely to be China’s GDP and Industrial Production reports on Wednesday, October 19. GDP is expected to remain steady at 6.7%.

 

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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