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AUD/USD and NZD/USD Fundamental Daily Forecast – Further Weakness Seen Ahead of Aussie, Kiwi Economic Reports

By:
James Hyerczyk
Published: Dec 18, 2019, 09:03 UTC

A “risk-off” scenario is likely to keep the pressure on the Aussie and Kiwi on Wednesday. Furthermore, there is still work to do on the downside after the RBA signaled a likely rate cut in February. There are still a lot of speculative longs that need to exit their positions.

AUD/USD and NZD/USD

The Australian and New Zealand Dollars are trading lower on Wednesday, continuing Monday’s steep decline. The selling pressure is being generated by a number of factors including the Reserve Bank of Australia’s (RBA) signaling a potential rate cut as early as February, uncertainty over the details of the U.S.-China trade deal and renewed worries over a hard Brexit, which is limiting demand for risky assets.

At 08:23 GMT, the AUD/USD is trading .6847, down 0.0004 or -0.06% and the NZD/USD is at .6561, down 0.0013 or -0.20%.

Traders are also likely squaring positions ahead of Thursday’s release of the New Zealand quarterly GDP and Australian employment reports.

RBA Opens Door to February Rate Cut

Minutes from the Reserve Bank of Australia’s (RBA) December meeting, where the central bank opted to leave the cash rate unchanged at 0.75%, showed it was “prepared to ease monetary policy further if needed.”

“Members agreed that it would be important to reassess the economic outlook in February 2020, when the Bank would prepare updated forecasts,” the meeting minutes read. “As part of their deliberations, members noted that the Board had the ability to provide further stimulus to the economy, if required.”

Market Sentiment Boosted, but Traders Remain Cautious

Market sentiment has gotten a boost in recent days after the U.S. and China announced Friday they have reached a phase one trade deal. However, there is still a lot of work to do before the two economic powerhouses can consider the deal complete. Therefore, traders can’t really dismiss this risk throughout 2020.

Renewed Worries over Hard Brexit

Brexit risks flared amid reports on Tuesday that U.K. Prime Minister Boris Johnson will amend the Brexit bill, explicitly ruling out any extension to the transition period beyond December 2020. The U.K. is due to leave the European Union by January 31.

That would leave little time to reach a trade deal with the EU, raising the risks of a no-deal Brexit.

Daily Forecast

A “risk-off” scenario is likely to keep the pressure on the Aussie and Kiwi on Wednesday. Furthermore, there is still work to do on the downside after the RBA signaled a likely rate cut in February. There are still a lot of speculative longs that need to exit their positions.

We could also see position-squaring ahead of the New Zealand GDP and Australian employment reports.

New Zealand GDP is expected to come in at 0.5%, unchanged from the previous quarter. A higher number will indicate the recent RBNZ rate cuts are working. A lower number will signal that another cut may be necessary.

Australian Employment Change is expected to show the economy added 14.5K jobs in November. The Unemployment Rate is expected to come in unchanged at 5.3%. The key number to watch is the unemployment rate. This is the number that the RBA is watching. An increase in the unemployment rate will increase the chances of a rate cut in February. This would be bearish for the Australian Dollar.

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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