AUD/USD and NZD/USD Fundamental Forecast – April 25, 2017

The U.S. Dollar is rebounding against the Australian and New Zealand Dollars on Tuesday after the AUD/USD and NZD/USD traded mixed on Monday. Increased demand for higher yielding assets boosted both Forex pair yesterday at times, but the Kiwi was unable to hold onto its gains into the close.

Australia and New Zealand are on bank holiday so volume in the Forex market is light. This may be contributing to the exaggerated sell-off.

Australian Dollar investors may be squaring positions ahead of Wednesday’s consumer inflation report. Quarterly CPI is expected to come in at 0.6%, up from 0.5%. Trimmed Mean CPI for the quarter is expected to rise by 0.5%, up from 0.4%.

New Zealand will release its latest data on credit card spending.

Traders could also be reacting to the situation in North Korea. On Monday, U.S. President Donald Trump said the U.N. Security Council must be prepared to impose new sanctions on North Korea as concerns mount that it may test a sixth nuclear bomb as early as Tuesday.

AUD/USD and NZD/USD traders will also be paying close attention to events in Washington this week. On Wednesday, the Trump Administration is scheduled to release its tax reform plan.

The Trump Administration is also dealing with possibility of a government shutdown this week-end. Congress must reach deal concerning the U.S. budget by Friday, April 28^th. If they don’t do so, the government will shut down on Saturday, April 29^th at 12:00 a.m.

Economic Reports

Today’s U.S. reports include the monthly HPI which is expected to show a 0.1% increase. The S&P/CS Composite-20 HPI report is expected to show an annual 5.7% increase.

The Conference Board’s Consumer Confidence report is expected to come in at 123.67, down from 125.6. New Home Sales are expected to come in at 590K units, down from 592K. The Richmond Manufacturing Index is forecast to come in at 18, down from 22.

Forecast

Given the current downside momentum, we expect the Aussie and Kiwi to remain under pressure today although the light holiday volume makes the markets susceptible to a possible two-sided trade.