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AUD/USD and NZD/USD Fundamental Daily Forecast – Early Risk-On Tone Underpinning Aussie, Kiwi

By:
James Hyerczyk
Published: Oct 24, 2018, 06:20 UTC

Most of the trade today will be focused on the stock market. The recovery in the U.S. markets on Tuesday and the stabilizing Asian markets are generating enough of a “risk –on” tone to support both the Aussie and Kiwi.

AUD/USD and NZD/USD

The Australian and New Zealand Dollars are trading higher early Wednesday, helped by increased demand for higher risk assets. There were no major news events on Tuesday, only a dramatic turnaround in U.S. equity markets, which appears to be helping to generate today’s early upside momentum. Today’s early price action suggests investors aren’t too afraid of the downside at this time, feeling that perhaps the worst of the selling is over. I’m not suggesting that aggressive counter-trend buyers are driving the price action, but I do think we are seeing profit-taking and systematic short-covering.

At 0601 GMT, the AUD/USD is at .7099, up 0.0014 or +0.19%. The NZD/USD is at .6557, up 0.0002 or +0.02%.

Forecast

Most of the trade today will be focused on the stock market. The recovery in the U.S. markets on Tuesday and the stabilizing Asian markets are generating enough of a “risk –on” tone to support both the Aussie and Kiwi.

Furthermore, despite the steep drop in prices on Tuesday, there wasn’t much of a reaction to the move by the Aussie and Kiwi. This suggests that perhaps investors feel the recent selling may be overdone in light of the decent performances in the Australian and New Zealand economies. Last week, New Zealand reported a huge jump in quarterly consumer inflation, while the Australian unemployment rate fell to 5.0%.

Furthermore, both economies may be helped by relatively lower crude oil prices which are now down over $10 per barrel since October 3.

It’s a banner day in the U.S. on Wednesday with a slew of economic data slated. Nothing major but investors are likely to pay close attention to the New Home Sales figure. It is expected to come in at 627K units, down from 629K.

Additional reports include the Home Price Index, which is expected to increase 0.3%. Flash Manufacturing PMI is expected to come in at 55.4, down slightly from the previous reading. Flash Services PMI is expected to come in better at 54.1.

At 1800 GMT, the Fed will release its Beige Book.

FOMC Members Bostic and Mester are scheduled to speak. On Tuesday, Atlanta Fed President Raphael Bostic offered an upbeat take on the economy and said he believes the central bank should press forward with interest-rate increases to keep the expansion moving forward.

“Unless the data talk me out of it, I view a continued, gradual removal of policy accommodation as appropriate until we get to a neutral policy rate,” Mr. Bostic said.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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