AUD/USD and NZD/USD Fundamental Daily Forecast – Focus on Durable Goods Early, Yellen, Draghi Later

The Australian and New Zealand Dollars traded lower against the U.S. Dollar on Thursday. The Aussie posted a volatile outside trading range, clawing back to nearly unchanged for the session. The Kiwi continued to weaken as investors continue to digest the previous day’s economic news.

The AUD/USD settled at .7900, down 0.0002 or -0.03% and the NZD/USD finished the session at .7207, down 0.0015 or -0.21%.

Both Forex pairs felt pressure early in the session due to lower demand for higher risk assets. Traders were also squaring positions ahead of Friday’s key speeches by Fed Chair Janet Yellen and ECB President Mario Draghi at the central bankers’ symposium at Jackson Hole on Friday.

The Australian Dollar mounted a comeback after the release of disappointing U.S. Existing Home Sales. The New Zealand Dollar was also helped a little by the news, but the primary focus for traders was the bearish New Zealand government pre-election finance update. The report showed the government cut its economic growth forecasts.

The news left traders weighing the possible implications the government’s projections may have for interest rate policy at the Reserve Bank of New Zealand. Translation:  Investors are worried the economy is not strong enough to warrant a near-term interest rate hike by the RBNZ.

In other news, U.S. Weekly Unemployment Claims came in at 234K, slightly below the 237K estimate, and a little higher than last week’s figure.

Existing Home Sales unexpectedly fell in July to their lowest monthly level of the year due to a lack of properties for sale, which also continued to push up prices.

The National Association of Realtors said on Thursday existing home sales fell 1.3 percent to a seasonally adjusted annual rate of 5.44 million units last month. June’s sales pace was revised slightly lower to 5.51 million units.

Economists were predicting a rise of 0.9 percent to a rate of 5.57 million units. Sales were up 2.1 percent from July 2016. Supply was down 9.0 percent from a year ago. Housing inventory has declined for 26 consecutive months on a year-on-year basis.

Forecast

Prior to Yellen’s Jackson Hole speech at 1600 GMT and Draghi’s speech at 1900 GMT, traders will get a chance to respond to the latest U.S. Durable Goods report. Core Durable Goods Orders are expected to come in at 0.4%. Durable Goods Orders are forecast to decline 6.0%.

At Jackson Hole on Friday, most investors don’t anticipate any major statements on increasing interest rates from Yellen or Draghi. Speaking late in the session on Friday leaves very little time for investors to react to anything the two central bankers say. Because of the thin trading conditions, any moves are likely to be exaggerated also.

Going into the speeches, market expectations for a rate hike in December are just 37.6 percent, according to the CME Group’s FedWatch tool. This is actually bearish for the U.S. Dollar.

Unless Yellen or Draghi say something important pertaining to policy, I don’t expect much of a reaction in the Forex markets. We could, however, have some wild swings because of thin trading conditions. Volume is expected to remain light until after the September 4^th, U.S. Labor Day holiday.