AUD/USD and NZD/USD Fundamental Daily Forecast – Kiwi Plunges to 6-Month Low on Bearish Business Outlook

The Australian and New Zealand Dollars are trading lower early Wednesday with the Kiwi falling to its lowest level of the year. The currencies are being driven lower by a combination of factors including trade war concerns, a divergence in monetary policy and weak domestic data.

At 0507 GMT, the AUD/USD is trading .7378, down 0.0014 or -0.19% and the NZD/USD is at .6816, down 0.0037 or -0.53%.

Escalating tensions between the United States and China continue to rattle Australian Dollar traders because Beijing is Australia’s largest trading partner. Both the U.S. and China are working around the latest round of tariffs that were imposed about two weeks ago, and simmering over threats of further tariffs from the U.S. and retaliation from China.

Last week, President Trump said he asked the U.S. Trade Representative to China to consider a new 10-perent tariff on $200 million of Chinese goods. China responded with words, but it may have a tariff on U.S. oil imports up its sleeve.

On Monday, investors were rattled by a report in Sunday’s Wall Street Journal that said the U.S. would announce new investment restrictions on China later this week. The move is supposed to target China’s investment in U.S. technology companies. The White House denied the story, but none-the-less, the article was convincing enough to convince investors to shed higher risk assets like stocks and higher risk currencies like the Aussie and Kiwi.

The long-term picture is bearish for the Australian and New Zealand Dollars because of the divergence in monetary policies between the hawkish U.S. Federal Reserve and dovish RBA and RBNZ.

Forecast

There are no major reports this week from Australia so most of the price action in the currency is being driven by trade concerns, U.S. Treasury yields and demand for risky assets.

The story is different for the New Zealand Dollar. The NZD/USD is plunging early Wednesday, hitting its lowest level of 2018 after a report on business confidence signaled slower growth.

According to the ANZ Bank’s business confidence survey, a net 39 percent of companies were pessimistic about the 12 months ahead, down 12 points from the last reading. This was also the lowest reading since November.

Earlier in the session, the Kiwi held steady to higher after the New Zealand Trade Balance came in at 294 million, much higher than the 100 million estimate. The previous report was revised lower to 193 million.

Given the current short-term and long-term fundamentals, the outlook is bearish for the AUD/USD and NZD/USD on Wednesday.