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AUD/USD and NZD/USD Fundamental Analysis – Forecast for the Week of October 3, 2016

By:
James Hyerczyk
Published: Oct 2, 2016, 04:32 UTC

The Australian and New Zealand Dollars recovered from late selling pressure to close higher for the week. The AUD/USD finished at .7656, up 0.0035 or

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The Australian and New Zealand Dollars recovered from late selling pressure to close higher for the week. The AUD/USD finished at .7656, up 0.0035 or +0.46% and the NZD/USD ended the week at .7281, up .0040 or 0.56%.

The AUD/USD and NZD/USD started the week with a firm tone fueled by greater demand for higher yielding assets. Traders were reacting positively to a strong performance by Democratic candidate Clinton at the U.S. Presidential debates.

weekly-audusd

The rest of the week was pretty quiet as far as domestic data was concerned. In Australia, HIA New Home Sales came in at 6.1%, higher than the previous minus 9.7%. Private Sector Credit matched the previous read of 0.4%, but came in below the 0.5% estimate.

The week began with the New Zealand Trade Balance coming in considerably worse than the minus 730M estimate at minus 1265M. This probably solidified an interest rate cut in November by the Reserve Bank of Australia. Building Consents and ANZ Business Confidence rounded out the week with readings of minus 1.0% and plus 6.1% respectively.

Both Forex pairs received a boost at the mid-week when OPEC and other major producers agreed to cut production. This fueled another round of increased demand for higher risk assets.

Late in the week, the Australian and New Zealand Dollars were under pressure due to concerns over the financial health of Germany’s biggest bank, Deutsche Bank. News that hedge funds were pulling money out of the financial institution drove up demand for safer assets. By the close of trading on Friday, however, both the AUD/USD and NZD/USD had recovered from their earlier losses as shares of the bank rebounded on positive developments.

FORECAST

weekly-nzdusd

The direction of the AUD/USD and NZD/USD this week will once again be determined by whether investors are willing to take on risk. The Aussie is in a stronger position to rally than the New Zealand because of more a more hawkish central bank.

The Reserve Bank of Australia is expected to leave interest rates unchanged at 1.50% on Tuesday. However, it may mention concerns over the high value of the Aussie Dollar. The Reserve Bank of New Zealand is not scheduled to meet in October.

The key report comes at the end of the week. On Friday, the U.S. will release its latest Non-Farm Payrolls report. It is expected to show the economy added 171K jobs in September. The unemployment rate is expected to remain at 4.9% and Average Hourly Earnings are expected to move from 0.1% to 0.2%.

This report could set the tone of the markets the rest of the month because the Fed said that the jobs market must remain strong in order for it to raise rates in December. The AUD/USD and NZD/USD may weaken at the end-of-the-week if the jobs report is stronger-than-expected. Traders should pay close attention to the average hourly earnings number.

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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