AUD/USD and NZD/USD Fundamental Analysis – Forecast for the Week of February 27, 2017

The Australian and New Zealand Dollars were able to post small gains last week despite mixed fundamental news. The Aussie was pressured by dovish talk from the Reserve Bank of Australia. However, it and the Kiwi were underpinned by the uncertainty over the direction of U.S. interest rates.

The AUD/USD finished the week at .7668, up 0.0004 or +0.05% and the NZD/USD closed at .7194, up 0.0015 or +0.20%.

The economic data from New Zealand was scare with traders mostly reacting to the U.S. Dollar and the daily chart pattern. Buyers came in to support the NZD/USD last week after sellers failed to drive the market sharply through the previous week’s low at .7134. The Forex pair stopped at .7129, slightly above the major retracement zone at .7118 to .7057.

Australian Dollar traders had to deal with the RBA’s monetary policy minutes, and reports on construction, wages and private capital expenditures. Traders also had the opportunity to react to two speeches from RBA Governor Lowe.

The RBA minutes suggested the central bank is not likely to adjust monetary policy soon, as some have speculated. The RBA also noted that Australia’s third quarter contraction was likely a one-time event, reflecting temporary forces that are not expected to continue in the December quarter.

RBA Governor Philp Lowe essentially talked down the Australian Dollar when he expressed his concerns over Australia’s high household debt-to income ratio. He said that this would likely prevent further easing.

Forecast

Domestically, the key report this week is Fourth Quarter Australian GDP. It is expected to come in at 0.7% after falling by 0.5% during the third quarter.

Minor reports include Company Operating Profits, Current Account, Building Approvals and Trade Balance.

New Zealand Dollar investors will have the opportunity to react to reports on Trade Balance and Business Confidence.

In the U.S., key reports include Durable Goods, Preliminary GDP, Consumer Confidence and PMI. Volatility is likely to be generated by several Fed speakers including FOMC Member Robert Kaplan on Monday and Wednesday. Lael Brainard is also scheduled to speak on Wednesday. The week ends with key speeches from FOMC Members Charles Evans and Jerome Powell as well as Fed Chair Janet Yellen.

The volatility is likely to be fueled by the clash between investors who are betting the Fed will continue to remain soft on interest rates and the hawkish Fed speakers who may be trying to build a case for a March or June rate hike.