AUD/USD and NZD/USD Fundamental Daily Forecast – Appetite for Risk Driving Rally

The Australian and New Zealand Dollars continue to rally on Monday in reaction to a weaker U.S. Dollar, increased appetite for risk and rising bets their respective central banks will soon join other major central banks in tightening monetary policy.

At 1108 GMT, the AUD/USD is trading .7954, up 0.0042 or +0.54% and the NZD/USD is at .7289, up 0.0044 or +0.61%.

The Aussie’s recent rally has been built on a combination of factors, including rising commodity prices, M&A flows, demand for bonds and rising risk appetite.

The Kiwi’s rise is mostly being driven by increased appetite for risk.

So far this year, investors buying risky assets have done very well. The global economy is in what investors are describing a “big synchronized upswing” and people are pretty positive. The Australian and New Zealand Dollars tend to do very well in this kind of environment and the U.S. Dollar does not.

The question AUD/USD and NZD/USD buyers should be asking is how long will demand for risk last?

Monday is a bank holiday in the U.S. so volume is expected to be low. This could lead to increased volatility. Since there isn’t expected to be a major stopper in the market, the upside momentum is likely to continue throughout the session.

The key reports this week from Australia are Employment Change and Unemployment Rate. These reports are not likely to change the trend. I think at this point in the rally, dovish comments from the RBA and RBNZ will be most effective.