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James Hyerczyk
AUD/USD and NZD/USD
AUD/USD and NZD/USD

The Australian Dollar and New Zealand Dollar are under pressure on Friday as the sell-off continues in the global equity markets. Today’s stock market rout was triggered late Thursday after Amazon reported a miss on revenue and guidance. The news triggered a 10% drop in the stock’s value. A decline in shares of Alphabet (Google’s Parent) is also contributing to the stock market plunge. It reported a miss on revenue, but beat on the bottom line.

At 1038 GMT, the AUD/USD is trading .7030, down 0.0049 or -0.68% and the NZD/USD is at .6469, down 0.0053 or -0.82%.

The weakness in the U.S. markets has spread to the Asian markets. Given its close economic relationship to not only China but many emerging markets across Asia, as well as being a highly-liquid currency compared to many Asian peers, the Aussie’s movement is often reflective of sentiment shifts towards the Chinese economy.

At 1043 GMT, Japan’s Nikkei 225 Index is trading 21184.60, down 84.13 or -0.40%. Australia’s S&P/ASX 200 is at 5665.20, up 1.10 or +0.02%. China’s Shanghai Index is at 2598.85, down 4.95 or -0.19%.

In other news, the Yuan hit a fresh 22-month low against the dollar on Friday, as a weaker-than-expected central bank fixing ramped up market views that authorities would allow larger declines in the currency.

In U.S. economic news on Thursday, Core Durable Goods Orders came in lower than expected at 0.1%, missing the 0.5% forecast. Durable Goods Orders, however, beat the -1.3% forecast with a 0.8% reading.

The Goods Trade Balance rose to -76.0 Billion. This was worse than the -74.9 Billion forecast. Preliminary Wholesale Inventories rose 0.3%, better than the 0.5% estimate. The previous reading was revised higher to 1.0%.

Weekly Unemployment Claims were 215K, slightly above the 214K forecast. Pending Home Sales improved nicely by 0.5%. This beat the -0.1% forecast.

In Fed news, Federal Reserve Vice Chairman Richard Clarida, in his first major policy speech since being seated at the central bank, said more interest rate increases are likely warranted as the economy continues to gather strength. In assessing current conditions, Clarida said growth broadly and with the job market in particular has surprised him.

Forecast

The AUD/USD smashed through its October low at .7042 earlier in the session. The building downside momentum has put the Forex pair on course for a possible test of the February 9, 2016 main bottom at .6973.

Momentum is also hitting the NZD/USD. However, it has room to go before it reaches its October bottom at .6424.

While the primary focus will be on the volatility and direction of the stock market, traders will get a chance to reaction to a couple of key U.S. reports. Advance GDP is expected to come in at 3.3%, down from the previously reported 4.2%. The Advance GDP Price Index is forecast at 2.1%, down from 3.0%.

Revised University of Consumer Sentiment is expected to dip slightly to 98.9 from 99.0.

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