AUD/USD and NZD/USD Fundamental Daily Forecast – Focus Will Be On Australian Unemployment Rate

The AUD/USD is likely to continue to key off the U.S. economic data over the near-term unless there is a big miss to the downside in the Employment Change report, or the Unemployment Rate surprisingly ticks higher.
James Hyerczyk
AUD/USD and NZD/USD

The Australian and New Zealand Dollars finished mixed on Wednesday with Aussie traders holding the currency in a tight range ahead of today’s employment reports, which could determine the timing of the next Reserve Bank of Australia (RBA) rate cut. The Kiwi posted a solid gain as the U.S. Dollar fell in reaction to weaker-than-expected U.S. housing data.

On Wednesday, the AUD/USD settled at .7010, down 0.0001 or -0.02% and the NZD/USD finished at .6732, up 0.0034 or +0.51%.

US Housing Starts Fall; Housing Permits Hit 2-Year Low

Data released by the U.S. government on Wednesday showed homebuilding fell for a second straight month in June and permits dropped to a two-year low, suggesting the housing market continued to struggle despite lower mortgage rates.

The U.S. Commerce Department said housing starts decreased 0.9% to a seasonally adjusted annual rate of 1.253 million units last month as a rebound in the construction of single-family housing units was offset by a plunge in multi-family homebuilding.

Data for May was revised slightly down to show homebuilding falling to a pace of 1.265 million units, instead of slipping to a rate of 1.269 million units as previous reported.

Economists were looking for housing starts to come in at 1.261 million units in June.

Building permits tumbled 6.1% to a rate of 1.220 million units in June, the lowest level since May 2017. Traders were pricing in 1.30 million units.

US Treasury Yields Fall on Housing News, Dragging US Dollar Lower

U.S. Treasury yields fell on Wednesday following the release of the weaker-than-expected housing data. At the close, the yield on the benchmark 10-year Treasury note was lower at around 2.052%, while the yield on the 2-year Treasury note yielded 1.82%.

The decline in yields helped make the U.S. Dollar a less-attractive asset, while driving up the New Zealand Dollar and underpinning the Australian Dollar.

Daily Forecast

All eyes will be on the Australian Dollar at 01:30 GMT with the release of the Australian Employment Change and Unemployment Rate reports for June.

The Employment Change report is expected to show the economy added 9.1K jobs in June. This is down from 42.3K in May. The Unemployment Rate is expected to remain at 5.2%. This is the number that will likely determine whether the RBA cuts rates in August or later in the year. The participation rate is also seen unchanged at 66.0%.

The AUD/USD is likely to continue to key off the U.S. economic data over the near-term unless there is a big miss to the downside in the Employment Change report, or the Unemployment Rate surprisingly ticks higher.

Ahead of the report, TD Securities says:

“We anticipate some give back in June from May’s election driven boost to employment. We forecast +5k for headline June employment, the participation rate to remain at 66% and the unemployment rate to remain at 5.2%. The risk is for the unemployment rate to hedge higher should more people be looking for work.”

Westpac says, “In Australia, we have the key June employment report which is expected to rise 9k and see the unemployment rate hold at 5.2%. Westpac is forecasting a 10k increase in employment but expects the unemployment rate to decline to 5.1% due to a pull-back in the participation rate. Q2 NAB business survey will provide further detail on the monthly read – conditions (+2) and confidence (+3) both below average in June.”

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