AUD/USD and NZD/USD Fundamental Daily Forecast – Ranges May Tighten Ahead of Australian Consumer Inflation Data

The Australian and New Zealand Dollars are trading mixed early Monday. The currencies are showing little reaction to dovish comments from a Reserve Bank of Australia on Friday. The AUD/USD is trading slightly higher and the NZD/USD is trading a little lower.

There was no follow-through to the upside by the Kiwi following Friday’s strong rally or to the downside after the Aussie’s lower close on Friday. Both Forex pair are trading inside Friday’s range which suggests investor indecision and impending volatility.

There are no major reports out of Australia and New Zealand on Monday. Later in the session, the Conference Board will release the Leading Index report on China. The U.S. is scheduled to release data on Flash Manufacturing PMI, Flash Services PMI and Existing Home Sales. None of these reports are expected to set the market on fire, especially ahead of Wednesday’s Australian quarterly Consumer Inflation data and the latest monetary policy statement and interest rate decision from the U.S. Federal Reserve.

Last week, hawkishly perceived comments from the minutes of the July Reserve Bank of Australia monetary policy meeting sent the AUD/USD soaring to multi-year highs, but on Friday, an RBA official tried to hose down rate-hike talk and the currencies with potentially dovish comments.

Speaking at a business lunch in Adelaide, RBA deputy governor Guy Debelle said:  No significance should be read into the fact the neutral rate was discussed at this particular meeting. The AUD/USD sold-off immediately after the comment was made.

Traders will be watching the price action in the Australian Dollar rather closely on Monday because this could set the tone for the week. After the Debelle comment, the AUD/USD plunged to .7874. If this price is taken out then this will mean his comments are having a negative effect on the market. If enough downside momentum is generated over the near-term, we could see an eventual break into the .7780 to .7731 retracement zone.

If there is no follow-through break then this will indicate the presence of strong buyers. Debelle’s comments were geared towards the RBA raising rates, however, a weaker U.S. Dollar, a stronger economy in China and a widening of the interest rate differential may be enough to send the Aussie back to .8000.