AUD/USD and NZD/USD Fundamental Daily Forecast – Lower Risk Demand Should Weigh on AUD, NZD

The Australian and New Zealand Dollars are trading steady to a little better earlier Friday. A rebound in higher-yielding assets is helping to boost the Aussie and the Kiwi.

At 0630, the AUD/USD is trading .7887, up 0.0004 or +0.05% and the NZD/USD is at .7291, up 0.14% or +0.13%.

On Thursday, both Forex pairs fell sharply in reaction to a steep drop in U.S. equity markets. The AUD/USD finished the session at .7883, down 0.0041 or -0.52% and the NZD/USD closed the session at .7282, down 0.0030 or -0.40%.

U.S. political turmoil and geopolitical concerns helped trigger a steep drop in U.S. equity markets. This indicated lower demand for higher-risk, higher-yielding assets. The Aussie and the Kiwi are considered higher-yielding assets so they fell accordingly.

In other news, Australian data showed employment numbers rose by 27,900 in July, their 10^th straight monthly gain, taking the unemployment rate to 5.6 percent, from 5.7 percent in June.

The gain in employment was solely due to an increase in part-time work and economists said the data would do little to change the Reserve Bank of Australia’s neutral policy stance.

Forecast

The direction of the AUD/USD and EUR/USD will continue to be driven by demand for risky assets on Friday. Look for the Aussie and Kiwi to rally if it’s a risk on session, and for the sell-off to continue if risk is off.

If volatility is average today then investors will shift their focus back to the direction of U.S. interest rates. Since the Fed appears to be dovish based on its minutes released earlier in the week, the Aussie and the Kiwi may be underpinned.