AUD/USD and NZD/USD Fundamental Forecast – February 17, 2017

The Australian and New Zealand Dollars are under pressure early Friday. A rebound in the U.S. Dollar is the major contributor to the weakness. Additionally, Australian Dollar traders are taking profits after a tremendous run which took the currency to its highest level since before the U.S. presidential election.

The weakness in the New Zealand Dollar is a continuation of the move that started a week ago when the Reserve Bank said it would wait a considerable amount of time before raising interest rates.

Shortly before the New York opening, the AUD/USD is trading .7665, down 0.00295 or -0.38% and the NZD/USD is down .0026 or -0.37% at .7187.

The Aussie has been supported all year, making it one of the biggest gainers of 2017. The currency is up nearly 7 percent this year, led largely by expectations of faster inflation in the U.S. and globally.

The Australian Dollar has also been supported this year by rising commodity prices, especially iron ore, its biggest export. This has helped boost terms of trade and in turn the country’s national income.

The New Zealand Dollar has been under pressure since February 9 when the RBNZ came out a little more dovish than expected in its monetary policy statement.

There were no major reports out of Australia overnight, but in New Zealand, the Business NZ Manufacturing Index came in at 51.6, lower than the last report. Quarterly retail sales were also lower than expected at 0.8%. Finally, Core Retail Sales also missed the estimate with a read of 0.6%.

Forecast

Profit-taking and downside momentum are likely to keep the pressure on the AUD/USD and NZD/USD respectively on Friday. In the absence of major economic data, investors are likely to take their cues from the direction of the U.S. Dollar.

The dollar is currently being controlled by the movement in the U.S. Treasury yields. They posted a two-sided trade due the lack of clarity from Fed Chair Janet Yellen during her testimony before Congress earlier in the week.

The only report today in the U.S. is the Conference Board’s Leading Index. Monday is also a U.S. bank holiday so we could see a drop-off in volume later in the session.