AUD/USD and NZD/USD Fundamental Daily Forecast – RBA Rate Statement on Tap; Expect No Change

The Australian and New Zealand Dollars are trading higher after a mostly lackluster trade on Monday. Both currencies posted two-sided trades as traders squared positions ahead of key central bank announcements later this week.

At 2059 GMT, the AUD/USD is trading .7683, up 0.0024 or +0.31% and the NZD/USD is trading .6925, up 0.0033 or +0.48%.

In New Zealand, ANZ Commodity Prices fell 0.3%. This was down from last month’s 0.8% increase. Inflation Expectations also came in lower at 2.0% versus 2.1%.

In Australia, ANZ Job Advertisements increased 1.4%, but the previous month was revised lower to 0.7%.

There were no major U.S. economic releases on Monday. This leads me to believe that the price action was fueled by a drop in U.S. Treasury yields.

U.S. Treasury yields fell Monday after a speech by New York Federal Reserve President William Dudley.

The yield on the benchmark 10-year Treasury Note fell to around 2.318 near the close, while the yield on the 30-year Treasury Bond fell to 2.797 percent.

Dudley drove yields lower when he urged Congress on Monday to “do no harm” in its deliberations on whether to roll back regulations implemented during the financial crisis, reported Reuters. These regulations, implemented during the financial crisis, introduced sweeping mandates including capital and liquidity requirements on banks.

“As we reflect on potential changes to the U.S. regulatory regime, we should not lose sight of the horrific damage caused by the financial crisis, including the worst recession of our lifetimes and millions of people losing their jobs and homes,” said Dudley.

Political news was also at the forefront on Monday with President Trump visiting Asia this week. On Monday, Trump visited Japan, saying he stood by the country when it comes to dealing with the “menace” from North Korea, Reuters reported; with Trump adding that both the U.S. and Japan should work together to fix issues with trade.

Forecast

The Australian Dollar will be featured early Tuesday. At 2230 GMT, AIG will release its Construction Index. It came in at 54.7 last month.

At 0330 GMT, the Reserve Bank of Australia will release its rate statement and interest rate decision. It is widely expected to leave interest rates at the historically low 1.50%.

The RBA is expected to leave its benchmark interest rate unchanged for the 15^th month in a row on Tuesday, as it considers recent data that has indicated a mixed trajectory for economic growth.

Most economists surveyed expect the RBA to start lifting rates by the second half of next year.

In last month’s rate statement, the RBA sounded optimistic about an upswing in non-mining investment and a healthy infrastructure pipeline, but signaled it remained worried that housing debt is growing faster than wages.

We don’t expect any surprises from the RBA so the response by the AUD/USD is likely to be muted. The Forex pair appears to be forming a support base that could lead to a short-covering rally. The key level controlling the price action at this time is .7661.

The trend will change to up on a move through .7729. The downtrend will resume on a move through .7624 with the July 5 bottom at .7571 the next likely downside target.