AUD/USD and NZD/USD Fundamental Daily Forecast – NZD Looking Bullish after Trend Changes to Up

The Australian and New Zealand Dollars have recovered from early session weakness and are now trading higher, resuming the rallies that began last week with the release of the dovish Fed minutes.

At 1019 GMT, the AUD/USD is trading .7642, up 0.0030 or +0.39% and the NZD/USD is at .6901, up 0.0035 or +0.51%.

The Aussie and the Kiwi are being supported by a weaker U.S. Dollar. The greenback is under pressure from a weakening inflation outlook in the U.S., which has cast doubt about how aggressively the Fed will need to raise rates over the next few years.

Later today, traders will get the opportunity to react to the latest U.S. New Home Sales report. It is expected to show a 627K increase, lower than the previous 667K.

The Congressional hearing on Fed Chair nominee Jerome Powell will also be watched on Tuesday for an insight to Powell’s views on monetary policy and on the U.S. inflation picture. Retiring Chair, Janet Yellen, will also be appearing before Congress this week when she gives here semi-annual testimony on monetary policy on Wednesday.

Forecast

The earlier price action suggests that the key market moving story today will be future rate hikes by the Fed. Futures traders have already reduced their expectations from three to two rate hikes in 2018. This is helping to widen the spread between Australian and New Zealand Government Bonds and U.S. Government Bonds, making the U.S. Dollar a less-attractive investment.

Technically, the key area the AUD/USD has to overcome is the retracement zone at .7630 to .7654. Look for the Forex pair to strengthen on a sustained move over .7654 and for it to weaken under .7630.

The NZD/USD is also looking bullish. The trend changed to up on the daily chart when buyers took out .6905. A sustained move over this level could trigger an acceleration to the upside.