AUD/USD and NZD/USD Fundamental Daily Forecast – Showing Sensitivity to Crude Oil, but Trade War Concerns Main Story

Both the Australian and New Zealand Dollars are under pressure shortly before the U.S. opening, but remain near last week’s high. Despite the two-day short-covering rallies by the Forex pairs, longer-term short-sellers are not too concerned about the counter-trend moves because the fundamentals are bearish.

At 0955 GMT, the AUD/USD is trading .7424, down 0.0026 or -0.22% and the NZD/USD is at .6897, down 0.0013 or -0.19%.

Late last week, the Aussie and Kiwi rallied because of weaker-than-expected U.S. Philly Fed manufacturing data on Thursday. On Friday, their rallies were fueled by a 5-percent surge in crude oil which drove up the commodity-linked currencies.

The short-covering rallies temporarily offset any negativity generated by the escalating trade war between the United States and China. However, today’s early weakness in crude oil and renewed concerns over US-China relations are weighing on the Aussie and Kiwi once again.

The key story pressuring the AUD/USD and NZD today is coming from The Wall Street Journal. On Sunday evening, The WSJ, citing people familiar with the matter, reported that President Trump plans to bar many Chinese companies from investing in U.S. tech and to block additional technology exports to China.

This news is on top of Trump’s threat on June 18 to impose tariffs on $200 billion worth of Chinese goods at a rate of 10 percent.

China’s Commerce Ministry responded by saying it would take counter measures if the U.S. publishes an additional tariffs list.

Taking a longer-term view, any short-covering rally by the Aussie and Kiwi is not expected to last very long because the divergence between the hawkish U.S. Federal Reserve and the dovish Reserve Bank of Australia and the Reserve Bank of New Zealand should eventually bring in the sellers. Both the RBA and the RBNZ are expected to keep interest rates at current levels until at least late 2019, while the Fed is expected to raise rates at least two more times in 2018 and perhaps as many as three times next year.

We’re expecting continued pressure on the AUD/USD and NZD/USD today as long as crude oil prices remain lower and concerns over US-China trade relations continue to simmer.

Additionally, investors will get the opportunity to react to U.S. New Home Sales at 1400 GMT. The report is expected to show that 665K units were added. This will be slightly better than the 662K previous read.