AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Firming on Light Volume Ahead of RBA Minutes

The Australian and New Zealand Dollars are trading higher on Monday ahead of Tuesday’s release of the Reserve Bank of Australia’s (RBA) monetary policy meeting minutes and Wednesday’s U.S. Federal Reserve interest rate and monetary policy decisions and the Federal Open Market Committee’s (FOMC) economic projections.

Needless to say, traders should expect heightened volatility on both days since the RBA minutes may reveal that policymakers talked about a future rate cut, while the Fed could leave policy unchanged, or even lower the number of expected rate hikes later this year.

The AUD/USD is trading .7106, up 0.0019 or +0.27%, and the NZD/USD is at .6868, up 0.0022 or +0.32%.

The recent price action suggests that .7100 may be the line in the sand for Aussie traders following the release of the RBA minutes. Dovish minutes should send the Aussie tumbling through this level while a less-dovish RBA will send the currency higher.

The RBA has left its benchmark interest rate at a record low 1.50 percent since last easing in August 2016 and last month moved away from its long-held tightening bias to put rate cuts back in the picture.

Tuesday’s minutes of the RBA’s March meeting could provide further clues on the central bank’s future plans for interest rates. The latest financial futures activity indicates that traders are expecting an interest rate cut as early as August. One catalyst behind the RBA’s recent shift in attitude is the deep property market downturn.

In New Zealand, later this week, investors will get the opportunity to react to the latest figures on the country’s gross domestic product. It is expected to show the economy bounced in the December quarter although the annual pace likely slowed further.

As recently as early last week, the Aussie and Kiwi were being pressured by a drop in domestic rates. However, this weakness was offset by last week’s sudden plunge in U.S. Treasury yields.

There is only one report today in the U.S. the NAHB Housing Market Index is expected to come in at 63, up from 62. However, all eyes will be on the RBA minutes early Tuesday. After the initial reaction to the news, investors will shift their focus back to the U.S. Federal Reserve’s announcements on Wednesday at 1800 GMT.