AUD/USD and NZD/USD Fundamental Daily Forecast – Firming on Renewed Demand for Risk

After consolidating for two sessions during the Christmas holiday break on Monday and Tuesday, the Australian and New Zealand Dollars are posting modest gains on Wednesday shortly before the U.S. opening. Traders seem to be responding to positive developments in the U.S. stock markets, which could lead to increased appetite for higher-yielding currencies like the Aussie and the Kiwi.

At 1011 GMT, the AUD/USD is trading .7054, up 0.0016 or +0.22% and the NZD/USD is at .6730, up 0.0007 or +0.11%.

Although there are heightened concerns over the partial shutdown of the U.S. government, President Trump’s criticism of the U.S. Federal Reserve and a worrisome phone call from Treasury Secretary Mnuchin to a few major banks, the Aussie and the Kiwi seemingly have been unaffected by these recent developments. This is probably because all of this news has driven the dollar lower while increasing demand for safe-haven assets like the Japanese Yen and Swiss Franc. It looks as if the Aussie and the Kiwi fall somewhere between these currencies.

Perhaps also helping the currencies hold their range is the absence of negative news regarding US-China trade negotiations.

Forecast

Based on the early price action by the AUD/USD and NZD/USD, the direction of the U.S. stock market is likely to control the movement in the Aussie and Kiwi. In other words, a risk on session could be supportive for the currencies, while another drop in demand will likely keep a lid on rallies and could even fuel another leg down.

There are no major reports out of Australia and New Zealand today. However, investors will get the opportunity to react to the S&P/CS Composite-20 HPI data. This housing report is expected to come in at 4.8%, down from the previously reported 5.1%. The Richmond Manufacturing Index is expected to rise to 16 from 14, further supporting the notion of a strong U.S. economy.