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AUD/USD and NZD/USD Fundamental Daily Forecast – Showing Early Signs of Closing Price Reversal Bottom

By:
James Hyerczyk
Published: Oct 5, 2018, 13:39 UTC

The early price action suggests we could see a counter-trend short-covering rally. It also indicates that the selling earlier in the week that drove the Aussie and Kiwi sharply lower may have been investors pricing today’s job market news into the market. In other words, today’s report became a sell the rumor, buy the fact event.

AUD/USD and NZD/USD

The Australian and New Zealand Dollars are trading higher shortly after the release of the U.S. Non-Farm Payrolls report. Earlier in the session, a report showed Australian Retail Sales rose 0.3% as expected.

The move by the Aussie is a little surprising since the jobs data drove U.S. Treasury yields higher. This is because the widening of the interest rate differential between U.S. Government bonds and Australian Government bonds tends to make the U.S. Dollar a more attractive investment. We’re not too concerned, however, since the longer-term fundamentals are bearish. If there is a short-term counter-trend rally then gains are likely to be limited.

At 1321 GMT, the AUD/USD is trading .7077, up 0.0013 or +0.18%. The NZD/USD is at .6472, up 0.0003 or +0.05%.

The benchmark 10-year yield hit their highest level since 2011 on Friday after the Labor Department’s monthly jobs report showed another month of rising wages and a sharply higher revision to August’s headline number.

The U.S. economy added only 134,000 jobs in September, well below the expected gain of 185,000. However, investors were primarily impressed by the job gains for August which received a sharp upward revision with the addition of 270,000 jobs from 201,000.

Additionally, job creation for September fell to its lowest level in a year, but the unemployment rate dropped to a level not seen in nearly 50 years, the government report showed. The unemployment rate fell to 3.7 percent, down from 3.9 percent.

Average Hourly Earnings rose 8 cents or 0.3 percent over the month, matching August’s gains. That drove the year-over-year increase in wages to 2.8 percent.

Forecast

The early price action suggests we could see a counter-trend short-covering rally. It also indicates that the selling earlier in the week that drove the Aussie and Kiwi sharply lower may have been investors pricing today’s job market news into the market. In other words, today’s report became a sell the rumor, buy the fact event.

Technical forces could also be driving the price action. Both the Aussie and Kiwi were technically oversold at the start of the session and ripe for a counter-trend reversal. If successful, we could see a 2 to 3 day retracement of this week’s sell-off.

Additionally, a recovery in the U.S. stock market after earlier weakness could also drive up demand for higher-yielding assets. This could also underpin the AUD/USD and NZD/USD.

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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