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AUD/USD and NZD/USD Fundamental Daily Forecast – Mixed US NFP Report Fuels Major Short-Covering Rally

By:
James Hyerczyk
Published: Jul 4, 2021, 20:23 UTC

The mixed U.S. Non-Farm Payrolls report drove U.S. Treasury yields lower, while weakening demand for the U.S. Dollar.

AUD/USD and NZD/USD

In this article:

Both the Australian and New Zealand Dollars posted dramatic technical closing price reversal bottoms on Friday after the details of a government labor report came in weaker than expected although the headline non-farm payrolls number exceeded expectations. The news drove U.S. Treasury yields lower, while weakening demand for the U.S. Dollar.

On Friday, the AUD/USD settled at .7526, up 0.0055 or +0.74% and the NZD/USD finished at .7031, up 0.0062 or +0.89%.

US Economic News

U.S. Treasury yields dipped on Friday as investors digested the June jobs report that showed a slight increase in unemployment rate.

The yield on the benchmark 10-year Treasury note fell 5 basis points to 1.42% touching its lowest level since June 21. The yield on the 30-year Treasury bond also slipped 5 basis points to 2.04%.

Job growth leaped higher in June with nonfarm payrolls increasing 850,000, the Labor Department reported Friday. The number was higher than a Dow Jones estimate of 706,000 and better than the upwardly revised 583,000 in May.

The unemployment rate, however, rose to 5.9% from5.8% in the prior month, which came in higher than the 5.6% expectation. The jobless rate increase came even though the labor force participation rate was unchanged at 61.6%. Wages were up 0.3% for the month and 3.6% year over year, both in line with expectations.

In other news, the U.S. trade deficit increased in May as efforts by business to rebuild inventories amid booming demand pulled in imports.

The Commerce Department said on Friday that the trade gap rose 3.1% to $71.2 billion in May. Economists polled by Reuters had forecast a $71.4 billion deficit. Goods imports rose 1.2% to $234.7 billion. Exports of goods gained 0.3% to $145.5 billion, a record high.

New orders for U.S.-made goods rebounded sharply in May, while business spending on equipment remained solid, despite bottlenecks in the supply chain.

The Commerce Department said on Friday that factory orders surged 1.7% in May after slipping 0.1% in April. Economists polled by Reuters had forecast factory orders rebounding 1.6%. Orders increased 17.2% on a year-on-year basis.

Technical Analysis

For the Australian Dollar, the main trend is down, but Friday’s closing price reversal bottom is a sign that momentum may be changing to the upside. The first upside target is .7531 to .7551. Overtaking this area could trigger further short-covering with .7611, .7617 and .7650, potential upside targets.

The New Zealand Dollar is also trending lower, but momentum may be getting ready to shift to the upside. A trade through .7095 will change the main trend to up.

For a look at all of today’s economic events, check out our economic calendar.

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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