AUD/USD and NZD/USD Fundamental Daily Forecast – Deck Stacked Against Aussie, Kiwi

The Australian and New Zealand Dollars are trading lower early Friday, following through to the downside after the previous session’s dramatic reversal to the downside.

At 0625 GMT, the AUD/USD is trading .7669, down 0.0016 or -0.20% and the NZD/USD is at .7253, down 0.0017 or -0.24%.

The current downside pressure is being fueled by fears of an escalation of a trade war between the United States and China. This came to the forefront late Thursday after U.S. President Trump said he had instructed U.S. trade officials to consider $100 billion in additional tariffs on China.

President Trump said in a statement that further tariffs were being considered “in light of China’s unfair retaliation” against earlier U.S. trade actions that have triggered volatile responses in the global financial markets.

The current price action also suggests investors may be taking the usual precautionary position adjustments ahead of the U.S. Non-Farm Payrolls report.

The Non-Farm Payrolls report due out at 1230 GMT is important because a substantial headline number, and wage growth could drive the U.S. Federal Reserve to act more quickly in raising interest rates. This would be bullish for the U.S. Dollar.

The NFP report is expected to show the U.S. economy added 188K new jobs in March. This is substantially lower than the previously reported 313K. Earlier in the week, ADP reported the private sector added 241K jobs last month so there may be some volatility in the NFP report number.

Average Hourly Earnings are expected to jump 0.3% versus the previously reported 0.1%. This number is important to the Fed because it indicates inflation. The higher the percentage change, the greater the chances the Fed will stick with its aggressive strategy to raise rates at least 2 more times this year.

The deck appears to be stacked against the Aussie and the Kiwi so we’re expecting to see lower prices today. An escalation of tensions between the U.S. and China will be the factor keeping a lid on any rally. Traders will be paying particular attention to the price action in the U.S. equity markets.

The AUD/USD and NZD/USD can recover from their earlier losses if the U.S. equity markets mount a dramatic turnaround combined with a weaker than expected NFP report.

Otherwise, we’re looking at a limited rally or a steep sell-off if stocks tumble and the NFP numbers, especially Average Hourly Earnings come in better than expected.