AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Supported by Weaker Greenback, Higher Iron Ore Prices

The Australian and New Zealand Dollars are trading higher on Tuesday. Their strength doesn’t reflect a shift in central bank policy or appetite for risk, but rather position-squaring ahead of the release of the March Fed minutes on Wednesday and a weaker U.S. Dollar.

Both commodity-linked currencies, but especially the Aussie are also being supported by stronger iron ore, crude oil and gold prices. The Australian Dollar received an additional boost from a better-than-expected housing data report.

At 07:35 GMT, the AUD/USD is trading .7144, up 0.0018 or +0.25% and the NZD/USD is at .6751, up 0.0009 or +0.15%.

Some traders are saying that there were plenty of reasons offered to explain why the U.S. Dollar weakened on Monday, but none were definitive. Early in the session, traders were saying that risk aversion was behind the move, but that idea didn’t pan out as U.S. equity prices remained firm throughout their session.

Other said the strength came from soaring crude oil prices and a jump in iron ore prices with low and mid-tier grades both closing at fresh five-year highs on Monday.

The price action and the inability to pinpoint the cause for the U.S. Dollar’s weakness happens sometimes. Markets move up and down because of buyers and sellers, and it looks as if someone wanted to buy the Aussie on Monday.

Ray Attrill, Head of FX Strategy at the National Australia Bank summed it up nicely say, “’Might” is one of those weasel words often used to explain market moves that don’t have an underlying cause beyond the order-driven nature of markets….”

Daily Forecast

Today’s strength is being fueled by better news from Australia on the home financing front. Earlier today, a report showed that lending to owner-occupiers and investors rose in February, but there’s little agreement among economists about what that means for the health of the housing market. Nonetheless, Aussie Dollar traders are reading the number as a positive for the currency.

The value of new lending commitments to households rose 2.6 percent to $32.13 billion in February, according to seasonally adjusted figures released on Tuesday by the Australian Bureau of Statistics, fuelled by a 3.4 percent monthly rise in the value of lending to owner-occupiers.

In the U.S., we’re looking at another light report day on Tuesday. Traders will get the opportunity to respond to the NFIB Small Business Index, the JOLTS Job Openings and the IBD/TIPP Economic Optimism Index. We could see a reaction in the AUD/USD and NZD/USD if there are big misses to the downside in these three reports.

Additionally, investors will be paying close attention to speeches by FOMC Members Quarles and Clarida. Traders will be looking for comments on future Fed policy decisions.

On March 29, Fed Vice Chairman Randal Quarles said that additional rate hikes “may be necessary at some point.” He also expressed confidence in the economy, saying the labor market remains strong, productivity is improving and inflation is in check.

On March 28, Fed Vice Chairman Richard Clarida said the Fed can’t ignore U.S. exposure to overseas risks. “One hears a great deal about the spillovers of U.S. monetary policy to other economies. One hears somewhat less, though, about how global shocks affect the U.S. economy,” Clarida said.