AUD/USD and NZD/USD Fundamental Daily Forecast – Arrest of Huawei CFO Will Affect US-China Trade Negotiations

With Australian and New Zealand Dollar investors focusing primarily on U.S.-China trade relations and a risk-off environment, today’s U.S. economic events may take a backseat. Look for further downside pressure today especially if U.S. equity markets continue to weaken.
James Hyerczyk
AUD/USD
AUD/USD

The Australian Dollar is breaking sharply for a third session and the New Zealand Dollar is down for a second day as the aggressive shedding of risky assets continues to weigh on the so-called higher-yielding currencies. The Aussie is getting hit the hardest with the catalyst behind the selling pressure weaker-than-expected economic data, and the arrest of a prominent Chinese businessman. Both currencies are also feeling pressure from renewed concerns over the trade dispute between the United States and China.

At 0525 GMT, the AUD/USD is trading .7225, down 0.0043 or -0.59% and the NZD/USD is at .6869, down 0.0029 or -0.42%.

The Australian Dollar was already facing pressure before the opening on Wednesday, following yesterday’s steep decline. That move was fueled by a report that showed the nation’s gross domestic product (GDP) came in at 2.8 percent, its slowest annual pace in two years and far below market expectations.

Weak Aussie Economic Data

The Aussie weakened further after Australian retailers posted another month of weak sales in October, raising concerns for a weak start for the final quarter of the year.

The data out on Thursday showed retail sales grew 0.3 percent in October from a downwardly revised 0.1 percent in September and economists’ expectations of a modest 0.2 percent rise.

The AUD/USD continued to weaken after data from the Australian Bureau of Statistics (ABS) showed Australia’s trade surplus shrank 21 percent to A$2.3 billion compared with A$2.9 billion the previous month as imports outpaced exports.

Arrest of Huawei CFO Could Be Game Changer

Further complicating matters was Canada’s arrest of Huawei global chief financial officer in Vancouver, where she is facing extradition to the United States on suspicion she violated U.S. sanctions against Iran, reports say.

This is major news affecting both the Australian and New Zealand Dollars because it will affect trade negotiations between Washington and Beijing.

Forecast

With Australian and New Zealand Dollar investors focusing primarily on U.S.-China trade relations and a risk-off environment, today’s U.S. economic events may take a backseat. Look for further downside pressure today especially if U.S. equity markets continue to weaken.

The AUD/USD trend will change to down on the daily chart on a trade through .7199. This could lead to an acceleration to the downside. The NZD/USD is in better shape, but there is move to the downside with .6818 the next major target level.

In the U.S., traders will get the opportunity early Thursday to react to reports including Challenger Job Cuts, ADP Non-Farm Employment Change, Revised Nonfarm Productivity, Revised Unit Labor Costs, Trade Balance and Weekly Unemployment Claims.

At 1445 GMT, traders will get the opportunity to react to Final Services PMI. At 1500, the major report will be released. ISM Non-Manufacturing PMI is expected to come in at 59.1, down slightly from 60.3. Factor Order are also due to be released to this time.

Also on tap are speeches by FOMC Members Bostic and Williams. The day ends with a speech by Fed Chair Jerome Powell at 2345 GMT.

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