AUD/USD and NZD/USD Fundamental Daily Forecast – Omicron Worries, Low Holiday Volume Put a Lid on Prices

The Australian and New Zealand Dollars are inching higher early Friday on low holiday volume as traders continue to deal with strong technical resistance areas that have stopped the currencies from progressing all week.

Uncertainty over the impact of the Omicron coronavirus variant is another reason for the limited upside action as an explosion of new coronavirus cases in Australia cast a pall over the economic outlook at home.

Despite this barriers, the Aussie and Kiwi have been supported over the short-run by increased demand for risker assets. News from China on Manufacturing, Non-Manufacturing PMI’s was positive, likely lending some support.

Essentially, extremely low volume has created a stalemate with traders who believe Omicron will have a limited impact on the economic recovery and those who believe it will slow it down.

At 09:57 GMT, the AUD/USD is trading .7270, up 0.0019 or +0.27% and the NZD/USD is at .6842, up 0.0010 or +0.14%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $71.93, down $0.02 or -0.03%.

Omicron Threatens to Derail Australian Economy

Sentiment was tested by a shock 21,151 surge in new coronavirus cases in New South Wales, double the previous day’s total and up from just 200 early in the month.

The jump risked crimping consumer sentiment and spending, with plenty of media reports of mass restaurant and holiday cancellations.

Analysts will be keen to see data on bank card spending out over the next couple of weeks to gauge how much damage has been done. Retail sales had seen running strongly through November and into December, so some slowdown would not surprise.

China Manufacturing PMI, Non-Manufacturing PMI Beat the Forecasts

China’s factory activity unexpectedly accelerated in December, but only by a slim margin, an official survey on Friday showed, with analysts foreseeing more economic headwinds in the near term and policymakers being pressured to offer support measures.

The official manufacturing Purchasing Managers’ Index (PMI) rose to 50.3 from 50.1 in November, data from the National Bureau of Statistics (NBS) showed.

Analysts had expected it to fall slightly to the 50-point mark, which separates growth from contraction.

Activity in China’s overall services sector grew at a slightly faster pace in December, rising to 52.7 from November’s 52.3.

Finally, China’s official composite PMI, which includes both manufacturing and services activity, stood at 52.2 in December, unchanged from November.