AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Employment Change Meets Expectations

The Australian and New Zealand Dollars continued their winning ways on Wednesday. Both currencies continued to react to the positive vibe generated by the Reserve Bank of Australia on Tuesday and diminished chances for a Fed rate hike later this year. Kiwi investors also continued to shrug off Tuesday’s weaker-than-expected quarterly inflation report.

The AUD/USD settled at .7953, up 0.0037 or +0.46% and the NZD/USD closed at .7355, up 0.007 or +0.10%.

To recap, investors drove the AUD/USD to its highest level in two years on the back of an upbeat assessment of the economy by the RBA. The news increased the chances of a sooner-than-expected rate hike although this is not likely to take place until next year.

In New Zealand, consumer inflation came in flat last quarter, disappointing investors who were looking for an increase of 0.2%.  Investors didn’t care too much about the news, however, deciding to follow the upside momentum generated by the rally in the Australian Dollar instead.

In other news, U.S. Building Permits rose by 1.25M units, beating the 1.20M forecast. Housing Starts showed a 1.22M increase, also above the estimate.

Forecast

Both the AUD/USD and NZD/USD are trading lower early Thursday. The New Zealand Dollar opened weak and the selling pressure is increasing. The Australian Dollar initially rose in response to Australian employment data. The move drove the market to a new high for the week before sellers came in to drive the Forex pair lower for the session.

According to the Australian Bureau of Statistics, Australian employment levels rose in June for a fourth consecutive month, powered by gains in full-time jobs.

Last month’s data, in seasonally adjusted terms, showed overall employment rose by 14,000 last month, following a revised gain of 38,000 in May. Traders were pricing in a monthly gain of 14,400.

Full-time employment surged by 62,000, following a revised gain of 53,400 in May. Part-time jobs decline by 48,000 following a net drop of 10,100.

The jobless rate rose to 5.6% last month as expected.

In other news, NAB Quarterly Business Confidence came in unchanged at 7.

On Thursday, investors will get the opportunity to react to the latest weekly unemployment claims. The report is expected to come in at 245K. The Philly Fed Manufacturing Index is expected to come in at 23.4, down from 27.6. The CB Leading Index is expected to rise 0.4%, up slightly from 0.3%.

The AUD/USD is under pressure early Thursday after the Australian employment report failed to spark another wave of buying. The price action suggests some disappointment with the numbers. It also indicates that the selling may be greater than the buying at current price levels. The momentum created by the move could give the Aussie a downside bias all session. Since the Australian Dollar had been guiding the New Zealand Dollar higher this week, I also expect weakness in the NZD/USD.