AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Poised to Move Higher on Back of Strong Jobs Data

The Australian and New Zealand Dollars are inching higher on Thursday amid the release of mixed domestic economic data. Surprisingly, the Aussie is the weaker of the two despite strong labor market data. The Kiwi, on the on the hand, is showing unexpected strength following the release of disappointing growth data.

Both currencies are being underpinned by a lower U.S. Dollar, which fell late Wednesday after the U.S. Federal Reserve released its hawkish monetary policy. The price action suggests the news was already baked into the market.

At 08:48 GMT, the AUD/USD is trading .7185, up 0.0013 or +0.16%. The NZD/USD is at .6805, up 0.0020 or +0.29%. On Wednesday, the Invesco CurrencyShares Trust ETF (FXA) settled at $71.18, up $0.70 or +0.99%.

Despite the slow start, both the Australian and New Zealand Dollars seem poised to breakout to the upside after spending weeks in a downtrend. Now that investors know what the Federal Reserve is planning, Aussie and Kiwi players are free to make adjustments to their positions to reflect future moves by their respective central banks. The initial rally from early December was mostly driven by short-covering. The current rally suggests speculative buyers have entered the game.

Australian Dollar Underpinned by Strong Jobs Data

The Australian Dollar is moving higher on Thursday after strong jobs data raised the likelihood that the central bank will wind down its pandemic-era bond buying early next year, following a similar move by the U.S. Federal Reserve on Wednesday.

Australian employment blew out pre-report estimates, adding 366,100 jobs in November, helping to push down the jobless rate to 4.6% from 5.2%. The RBA had forecast unemployment would not reach 4.5% until the middle of next year.

In response to the labor market’s strength, the yield on the Australian 3-year bond climbed to its highest in around a week, making the Aussie Dollar a more attractive investment to its U.S. counter-part. Speculators responded to the news by placing bets that the RBA will begin to wind-down or completely end its A$4 billion ($2.87 billion) a week bond-buying program as early as February. This move would set up the possibility of an earlier-than-anticipated rate hike by the RBA.

However, despite speculator hawkishness, RBA Governor Philip Lowe continued to express caution toward raising interest rates too soon.

Lowe said he RBA was open to tapering its quantitative easing starting in February. He also cautioned, however, that this would be dependent on data, and said rate hikes are unlikely in 2022.

Daily Outlook

With Aussie speculators betting on a sooner-than-expected rate hike by the RBA, we’re looking for buyers to continue to chew through minor resistance levels over the near-term, but we don’t see a major change in trend on the horizon.

Once the AUD/USD clears the .7212 level, we could see a surge into .7275 – .7341. The rally could stall inside this area.

Traders should keep in mind that the rapidly spreading Omicron coronavirus variant could still cause slower economic growth, which would support the need to push any rate hike expectations into the future.