AUD/USD and NZD/USD Fundamental Daily Forecast – Risk Aversion Could Pressure Both Forex Pairs

The Australian and New Zealand Dollars were under pressure on Tuesday due to stronger-than-expected U.S. economic data and a general risk-off tone due to geopolitical events.

The AUD/USD finished at .7912, down 0.0001 or -0.02% and the NZD/USD settled at .7328, down 0.0034 or -0.46%.

Also pressuring the Forex pairs were position-squaring ahead of Friday’s U.S. Consumer Inflation report. Sellers also hit the Aussie due to a dovish Reserve Bank of Australia which last week said the currency was overvalued. The Kiwi was being sold ahead of Thursday’s Reserve Bank of New Zealand’s interest rate decision and monetary policy statement.

In other news, the U.S. Dollar jumped against the Australian and New Zealand Dollars after data showed U.S. job openings surged to a record high in June. The moves were in reaction to a rise in U.S. Treasury yields. They rose after the Labor Department said on Tuesday that job openings, a measure of labor demand, increased 461,000 to a seasonally adjusted 6.2 million, the highest level since the series started in December 2000.

Later in the session, the AUD/USD and NZD/USD were capped by the news that North Korea had successfully created a miniaturized nuclear weapon designed to fit inside its missiles. Shortly before the close, a drop in U.S. equities led investors to abandon risky assets after President Donald Trump issued a warning to North Korea, saying that its threats will be “met with fire and fury.”

Forecast

There are a few economic reports today, but the primary focus for investors will be on the geopolitical tension between the United States and North Korea. If this situation escalates, investors are likely to continue to pull their money out of higher-yielding assets like stocks, and the Australian and New Zealand Dollars.

In other news, Westpac Consumer Sentiment disappointed with a negative 1.2% reading. Australian Home Loans also came in below the estimate with a 0.5% increase.

In China, Consumer Inflation slowed to 1.4%, below the 1.5% estimate. The Producer Price Index also missed expectations with a reading of 5.5% versus 5.6%.

Later today, the U.S. will release data on Preliminary Nonfarm Productivity, Preliminary Unit Labor Costs and Final Wholesale Inventories.

If investors continue to dump higher-risk assets, the AUD/USD and NZD/USD should remain under pressure.