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James Hyerczyk

The Australian and New Zealand Dollars are trading lower on Wednesday. The weakness is more of a drift then actual heavy selling pressure. This suggests that the bears still have a firm grip on the currencies and that buying is extremely light or non-existent.

The Aussie continues to straddle the mid-point of its monthly range at .6749 indicating it’s the stronger of the two currencies. The Kiwi, on the other hand, just crossed to the weak side of the January 20, 2016 main bottom at .6346.

Like the other currency markets, volume seems below average which could be indicative of end of the month position-squaring. Furthermore, the major U.S. banks may be winding down activity ahead of the long holiday week-end. Monday, September 3 is a U.S. bank holiday. Additionally, all the major U.S. exchanges are closed.

The lack of fresh developments over U.S.-China trade relations is also helping to limit the price action. Chatter between the United States and China has been kept to a minimum this week, which is making it difficult to make investing decisions after the flurry of activity last Friday and Monday.

There was only one economic report released earlier today in Australia. On Thursday, investors will get the opportunity to react to the major New Zealand ANZ Business Confidence report and the Australian Private Capital Expenditure report.

In Australia, the slowdown in construction industries has increased, with a far greater than expected contraction over the second quarter.

In seasonally adjusted terms, overall construction work fell by 3.8 percent over the three months, well short of the more optimistic, but still weak, market forecast of a 1 percent decline.

At 08:48 GMT, the AUD/USD is at .6746, down 0.0006 or -0.08% and the NZD/USD is at .6344, down 0.0018 or -0.28%.

Daily Forecast

Early Wednesday, Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr said monetary policy is still effective at its current accommodative settings, but needs to be paired with broader fiscal and structural reforms to work.

Last week, Orr said the RBNZ will do “whatever it takes” to turn the economy around. He further added that he was “pleased” with the central bank’s aggressive 50-basis point rate cut in early August.

Additionally, traders see about a 14% chance of a September rate cut, while there’s a 70% chance of a November cut.

Analysts at ANZ Bank say, “We expect a follow-up 25bp cut in November, but with the global data-flow deteriorating, September remains live. It’s our expectation that slowing economic momentum is finding a floor around about now, but so far the evidence of a rebound is tentative at best. Indeed, risks appear skewed towards the slowdown lasting little longer than we expect.”

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