AUD/USD and NZD/USD Fundamental Forecast – December 9, 2016

The Australian and New Zealand Dollar traded mixed on Thursday with the AUD/USD finishing at .7463, down 0.0018 or -0.24% and the NZD/USD ending the session at .7172, up 0.0011 or +0.15%.

Although both Forex pairs traded higher earlier in the session, both moved off their highs and lower into the close. The NZD/USD gave back more, but managed to finish higher. The AUD/USD gave back less, but managed to finish lower.

The New Zealand Dollar was supported early in the session by Reserve Bank of New Zealand Governor Graeme Wheeler. He was hawkish about the economy although he did express some concerns over housing.

There was little reaction to a few minor reports from Australia and U.S. The announcement from the European Central Bank generated the biggest response from traders.

The ECB voted to leave interest rates unchanged. The central bank also extended its quantitative easing program until December 2017. It also decided to reduce purchases to 60 billion Euros per month from 80 billion Euros.

ECB President Mario Draghi summed up the day’s events by saying “uncertainty prevails everywhere,” but added the risk of deflation has largely disappeared.

The ECB news was perceived as disappointing because it was widely expected to announce it would continue with its massive trillion-Euro bond-buying program.

The ECB announcement drove the Euro sharply lower while fueling greater demand for stocks. This helped boost the U.S. Dollar which put pressure on the Aussie and Kiwi.

Forecast

Although the main trend turned on the AUD/USD daily chart, I’m a little concerned that investors are shying away from buying strength. Even if they do and the market surges, I think gains will be limited by the retracement zone at .7544 to .7599.

The NZD/USD spiked higher on Thursday, but right into its retracement zone at .7186 to .7237. This zone is controlling the intermediate term direction of the market.

Without any major reports today, we could see a rangebound trade as investors start preparing for next week’s Fed interest rate announcement on December 14.