AUD/USD and NZD/USD Fundamental Weekly Forecast – Week Dominated by U.S. Reports, Yellen Testimony

The Australian Dollar finished lower last week, pressured by comments from the Reserve Bank of Australia (RBA) and the stronger U.S. Dollar. Gains were limited somewhat, however, by stronger than expected Trade Balance data.

The U.S. Dollar was boosted by a somewhat hawkish Fed minutes and a stronger-than-expected U.S. Non-Farm Payrolls report which increased the odds of a December rate hike by the Fed. Treasury yields also rose on the news.

The AUD/USD settled at .7600, down 0.0087 or -1.13%.

The RBA held interest rates steady as was widely expected, but the central bank did say it expected Australia’s economy to gradually recover. Australian Retail Sales came in better than expected as well as the Trade Balance. Trader reaction to the trade balance report was a little muted because investors felt the increase was fueled by unusual events.

There were no major reports from New Zealand last week with the currency primarily driven by the movement in the U.S. Dollar. Kiwi traders also reacted to the RBA statement because the Reserve Bank of New Zealand is likely to issue a similar statement in the near future.

The NZD/USD settled at .7280, down 0.0049 or -0.675.

Forecast

This week’s price action will be dominated by major reports from the United States. However, investors will get the opportunity to react to a few minor reports from the Australia, New Zealand and China.

The week starts with the focus on China inflation. Chinese Consumer Inflation is expected to come in slightly higher at 1.6%. Producer Inflation is expected to remain unchanged at 5.5%. Later in the week, China will report is latest Trade Balance figures. It is expected to come in a little lower than last month at 273 billion.

Australian Dollar traders will get the opportunity to react to the latest NAB Business Confidence report. New Zealand Dollar traders will be watching the Business New Zealand Manufacturing Index.

Fed Chair Janet Yellen is scheduled to testify before Congress on July 12 and 13. Her topic will be U.S. Federal Reserve Monetary Policy.

The U.S. will also report on Producer Inflation, but more importantly Consumer Inflation and Retail Sales. The CPI is expected to come in at 0.2%, up slightly from 0.1% and retail sales are expected to come in at 0.2%, much better than the previous -0.3%.

Yellen is expected to talk about the Fed’s semi-annual monetary policy report that reiterated the central bank’s desire to raise interest rates at least one more time later this year, despite muted inflation figures.