AUD/USD and NZD/USD Fundamental Forecast – January 23, 2017

Australian and New Zealand Dollar traders reacted to Trump’s inauguration speech by selling each currency. Perhaps it was fear, or just a reason to book profits after a long run-up. However, after trading higher earlier in the session, the selling was strong enough to produce a potentially bearish closing price reversal chart on the daily chart.

We’ll learn more about how investors feel on Monday. If there is a follow-through to the downside then this will be a sign that sentiment is turning negative. If the rally picks up once again then this will demonstrate that Aussie and Kiwi investors expect status quo over the near-term.

The AUD/USD closed at .7552, down 0.0008 or -0.10%. The NZD/USD finished at .7164, down 0.0024 or -0.33%.

In other news, over the week-end, the U.S. Commodity Futures Trading Commission’s Commitment of Traders report showed net positioning in the Australian Dollar among speculators turned long for the first time in three weeks ahead of Trump’s presidential inauguration.

Forecast

There are no major reports today so investors are likely to continue to digest the inauguration speech of President Donald Trump. Since the overall theme of the speech was America first, it’s only natural for Aussie and Kiwi investors to feel nervous about holding long positions. However, it is early in the process and many investors have determined that Trump will take care of domestic issues before trying to change trade agreements or invoke aggressive tariffs.

Cautiousness is expected to be the theme at the start of the week because investors aren’t sure how Trump is going to carry himself. If Trump comes off as presidential then the dollar may firm. If he talks with confidence about his fiscal spending, cutting taxes or relaxing regulations then demand for the dollar may increase.

However, if he continues to sound divisive and does anything to disrupt the transition process then uncertainty is going to continue to drive the dollar lower.

We expect Trump to take care of a few domestic issues before he starts to work on rewriting trade agreements or determining tariffs.