AUD/USD and NZD/USD Fundamental Daily Forecast – Kiwi Plunges on Flat CPI, RBA Minutes Next

Despite yesterday’s stronger-than-expected Chinese economic data, the Australian and New Zealand Dollars declined against the U.S. Dollar. The Aussie followed through to the upside, hitting a 2-year high before sellers came in to stop the move.

The AUD/USD settled at .7797, down 0.0028 or -0.36% and the NZD/USD closed at .7317, down 0.0028 or -0.38%.

Low volume contributed to the selling pressure as well as position-squaring ahead of today’s New Zealand Consumer Inflation report and the release of the minutes from the June Reserve Bank of Australia monetary policy meeting.

Early Monday, China’s economy continued to beat expectations, with its second-quarter GDP coming in slightly ahead of analyst forecasts.

In the U.S. on Monday, the Empire State Manufacturing Index posted a lower-than-expected 9.8. This was well-below the 15.2 forecast and the 19.8 previous reading.

Forecast

The NZD/USD plunged early Tuesday after New Zealand’s inflation rate came in flat in the second quarter mainly due to lower fuel costs and a drop in airline prices. Sellers came in strong as the low inflation reading means the central bank is not going to raise interest rates any time soon.

New Zealand CPI came in at 0.0%, lower than the RBNZ expected. Traders were looking for a 0.3% increase.

Additionally, the flat inflation figure during the second quarter means that inflation rose by 1.7% from a year earlier, according to Statistics New Zealand. Economists had forecast a 1.95% increase over the year.

Later today at 0130 GMT, the RBA will release its minutes. With the Aussie Dollar sitting just below the .7800 level after touching a two-year high on Monday, traders are wondering if the currency is high enough to worry the Reserve Bank.

The RBA has not been shy about voicing its desire for a lower Australian Dollar. Some traders believe the central bank has a target of about .7000. Its main concern is that a higher Aussie Dollar could hurt the national economy by making exports less competitive.

The AUD/USD could break further from Monday’s high and weak close if the RBA uses strong language in the minutes in an attempt to talk the currency lower.