AUD/USD and NZD/USD Fundamental Daily Forecast – Position-Squaring Drives NZD Lower Ahead of RBNZ Rate Decision

The AUD/USD and NZD/USD were under pressure throughout the session on Monday. The Aussie posted an inside move, which indicates investor indecision and impending volatility. The Kiwi posted a lower-low which indicates the selling pressure is getting stronger.

Both Forex pairs continued to react to Friday’s robust U.S. Non-Farm Payrolls report. The Australian Dollar was also under pressure because of a dovish Reserve Bank of Australia. Volume and volatility were a little light due to a bank holiday.

In other news, AIG Construction Index was 60.5, up from the previous 56.0. The ANZ Job Advertisements report was up 1.5%, below the previous 2.7% reading.

In New Zealand, quarterly Inflation Expectations came is slightly below the previous read at 2.1%. Profit-taking and position-squaring ahead of Thursday’s Reserve Bank of New Zealand Rate Statement and Monetary Policy Statement also contributed to the weakness.

There was no major economic data on Monday. Most traders, however, are likely to sit on their hands until Thursday’s U.S. Producer Price Index report and Friday’s U.S. Consumer Inflation report.

Minneapolis Federal Reserve Bank President Neel Kashkari was expected to give a dovish speech about Fed policy. Instead, he gave a speech on President Trump’s proposed immigration plan. Kashkari said reducing immigration to the United States will reduce economic growth.

St. Louis Fed President James Bullard did address Fed policy. He said the Federal Reserve can leave interest rates where they are for now because inflation is not likely to rise much even if the U.S. job market continues to improve.

“The current level of the policy rate is likely to remain appropriate over the near term,” Bullard told the America’s Cotton Marketing Cooperatives 2017 Conference in Nashville, Tennessee.

Bullard also noted that the dollar had declined in value this year, chalking that move up largely to improved growth forecasts for Europe and the expectation that the European Central Bank will respond by tightening monetary policy.

Bullard also said recent readings of low inflation are “concerning” because they may be temporary but indicative of persistent factors such as better technology that is driving down the price of many goods and services.