AUD/USD and NZD/USD Fundamental Daily Forecast – Strong U.S. GDP Data Could Deliver Another Blow to Aussie, Kiwi

The Australian and New Zealand Dollars were hit hard on Thursday as investors reacted to technically overbought conditions and a recovery in the U.S. Dollar. Some traders felt the rally, fueled by Wednesday’s dovish U.S. Federal Reserve monetary policy statement, was overdone since most of the news was already baked into the prices.

Furthermore, investors also felt the last surge in prices was fueled by aggressive speculative buying and that the fundamentals are strong enough to support such a move. Earlier in the week, an Australian government report showed inflation was below the forecast. Additionally, a Reserve Bank of Australia official also expressed concerns over the labor market and wage growth. And just last Friday, another RBA official said investors misread the contents of the central bank minutes.

The U.S. Dollar was boosted by upbeat economic data. Initial jobless claims came in at 244,000, slightly above the 240,000 estimate and well-above the previous week’s 234,000K.

Core Durable Goods Orders rose 0.2%, below the 0.4% estimate and 0.3% previous read. Durable Goods Orders were up 6.5%, well above the 3.5% forecast and -0.8% previous read.

Additionally, Preliminary Wholesale Inventories rose 0.5%, worse than the 0.3% forecast. The previous read was revised upward to 0.4%. The Goods Trade Balance came in better than expected at -63.9 billion.

Forecast

On Friday, investors will get the opportunity to react to the latest quarterly Advance GDP. It is expected to show the economy grew by 2.5%, up from 1.4%. A stronger than expected number will drive up Treasury yields. Gold should decline on this news. A weaker number will be bullish for gold.

The Employment Cost Index is expected to come in at 0.6%, down from 0.8%. The Fed would like to see this number come in higher. This would also be bullish for the dollar.

Finally, Revised University of Michigan Consumer Sentiment is expected to come in at 93.2, basically unchanged from the previous month.

Late in the day, FOMC Member Kaplan is scheduled to speak.

The AUD/USD and NZD/USD formed potentially bearish chart patterns on the daily chart. They typically lead to 2 to 3 day correction. If these markets are bullish then buyers will step in to stop the price slide. If the Forex pairs are overvalued then the next rally will fall short of expectations and the selling pressure should increase.

The RBA’s response so far to the appreciation in the Australian Dollar has been pretty weak. This could mean that it’s comfortable with the move, and that perhaps economic factors will eventually weaken it. These include the start of the Fed’s process to trim its massive debt, which is in effect a rate hike and renewed weakness in the Chinese economy.