AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Traders Squaring Positions Ahead of RBA Minutes

The Australian and New Zealand Dollars are trading mixed shortly before the U.S. opening. The Aussie traded up to .7566 before breaking back to nearly unchanged. It’s trading inside Friday’s range which suggests investor indecision or impending volatility. The Kiwi traded higher earlier in the session before turn lower and taking out Friday’s low. Today’s rally stopped at .6975.

At 1044 GMT, the AUD/USD is trading .7544, up 0.0004 or +0.06% and the NZD/USD is at .6946, down 0.0016 or -0.23%.

There were no major reports out of Australia or New Zealand so today’s weakness is likely being fueled by weakness in crude oil. Last week’s rebound rally in the Aussie and Kiwi was partly fueled by a strong rally in crude oil. The rally to multi-year highs drove up demand for commodity-linked currencies.

Crude oil is being pressured by concerns over increased U.S. production and resistance in Europe and Asia to U.S. sanctions against major crude exporter Iran.

U.S. oil drillers added 10 oil rigs in the week to May 11, bringing the total count to 844, the highest level since March 2015, according to energy services firm Baker Hughes.

There are also reports that Germany has said it will protect its companies from U.S. sanctions. Iran has said French oil giant Total has yet to pull out of its fields. Additionally, some are saying China will fill the void created by the U.S. Last week, some traders said they were worried about increased production from Saudi Arabia, Kuwait and Iraq.

In other news, hedge funds and money managers slashed their bullish wagers on U.S. crude in the latest week to the lowest level in nearly five months, the U.S. Commodity Futures Commission (CFTC) said on Friday.

Forecast

Although the direction of the AUD/USD and NZD/USD will be primarily controlled by the direction of U.S. Treasury yields, today’s price action may be largely influenced by the direction of crude oil futures.

We could also see position-squaring in the Australian Dollar ahead of tomorrow’s speech by RBA Assistant Governor Debelle and the release of the Reserve Bank of Australia’s Monetary Policy Meeting Minutes.

Both Aussie and Kiwi traders are also preparing for the release of key economic reports from China including Fixed Asset Investment, Industrial Production, Retail Sales and Foreign Direct Investment.

Traders are also paying close attention to the ongoing negotiations between the United States and China as both try to avoid a trade war. Both Australia and New Zealand stand to benefit if this can be accomplished.