AUD/USD and NZD/USD Fundamental Daily Forecast – Benefiting from Improving Sentiment on Dampened Omicron Fears

The Australian and New Zealand Dollars extended their gains on Thursday as investors hoped reports the Omicron coronavirus variant was only mild in its effects meant its spread would be a transitory drag on the global economy. The news encouraged traders to liquidate safe-haven U.S. Dollar positions, boosting demand for riskier currencies.

On Thursday, the AUD/USD settled at .7243, up 0.0028 or +0.39%. That was some way from the .7083 low hit early in the week, but only slightly below a key retracement zone at .7275 to .7341.

The Invesco Currency Shares Australian Dollar Trust ETF (FXA) settled at $71.86, up $0.23 or +0.32%.

The NZD/USD finished at .6825, up 0.0013 or +0.19%, away from the recent trough of .6702, but in a position to perhaps extend the rally into a pivot level at .6878.

Investor Sentiment Improves on Positive Omicron Developments

Helping to boost sentiment were new studies suggesting that omicron has a lower risk of hospitalization than other COVID variants.

South African data offered a glimmer of hope on Wednesday about the severity of the Omicron coronavirus variant, but World Health Organization officials cautioned that it was too soon to draw firm conclusions as the strain spread across the globe.

The positive news was bolstered by research from London’s Imperial College which said the risk of needing to stay in the hospital for patients with Omicron was 40% to 45% lower than for patients with Delta.

Additionally, the Food and Drug Administration (FDA) granted emergency use authorization for Pfizer’s COVID pill, the first oral antiviral drug against the virus. The FDA also authorized Merck’s antiviral pill for COVID-19 on Thursday.

Australian Domestic Data Improves

Upbeat Australian domestic data also contributed to the gains with private credit surging 0.9% in November, the biggest gain since 2007 when the housing market was booming ahead of the global financial crisis.

Business credit jumped a healthy 1.6% in November, which could bode well for a pick up in investment in the new year.

Annual growth in housing loans accelerated sharply to 7.3% which, while moderate compared to the peak of 24% hit in 2007, will likely still be a red flag for regulators given how heavily indebted households are.

Regulators have already tightened some requirements on home loans but will be under pressure to do more if credit keeps expanding at such a rapid pace.

Short-Term Outlook

The Australian and New Zealand Dollars could rise next week if safe-haven buyers continue to liquidate long U.S. Dollar positions.