AUD/USD and NZD/USD Fundamental Daily Forecast – RBNZ Statement Less-Dovish Then Expected

The Australian and New Zealand Dollars are trading mixed early Thursday, The AUD/USD is trading .7547, down 0.0005 or -0.06% and the NZD/USD is trading .7255, up 0.0040 or +0.55%.

The Aussie is being pressured by a drop in commodity prices, but starting to show a comeback due to the recovery in the gold market. The steep plunge in crude oil this week has weighed the most on the Australian Dollar.

The New Zealand Dollar rallied sharply higher on Thursday after the central bank held its benchmark interest rate unchanged, but sounded less dovish in its monetary policy statement than investors had anticipated.

Traders had expected the Reserve Bank of New Zealand (RBNZ) to do more to talk down a resurgent Kiwi which had gained 3 percent since May. However, it only said a lower exchange rate “would help rebalance the growth outlook.” The RBNZ did not say that a lower currency was “needed” for rebalancing to occur. This surprised investors, triggering today’s short-covering rally.

The RBNZ also reiterated its policy would be accommodative for a “considerable period,” after the economy grew a disappointing 0.5 percent in the first quarter.

The central bank was optimistic about the outlook of the economy, citing low interest rates and the 2017 Budget which would help boost family income and infrastructure spending.

Both the Aussie and Kiwi are also being supported by a drop in U.S. Treasury yields. This is helping to make the U.S. Dollar a less-desirable investment. If U.S. yields continue to fall further then investors will chase the higher yields in Australia and New Zealand. This will help boost both currencies.

The NZD/USD is in a tough spot on the charts. Strong buying will be needed to drive the market through the recent top at .7319. This means investors are going to have to be willing and able to buy strength. If this rally fails to gain traction then look for the start of a possible pullback into the value zone at .7068 to .7009 over the near-term. However, I don’t think we’re going to get there unless falling Treasury yields take the U.S. Dollar down sharply.

The AUD/USD could continue to be dragged lower by falling crude oil prices. Its main target on the downside is .7504 to .7472. Weaker U.S. Treasury yields could slow down the break or trigger a resumption of the rally.