AUD/USD and NZD/USD Fundamental Forecast – March 30, 2017

The Australian and New Zealand Dollars closed higher on Wednesday, however, investors were scratching their heads as to who was providing the support since news was scare and the U.S. Dollar was strong. This leads us to believe that the price action was fueled by technical factors or end-of-the-month position-squaring.

On Wednesday, the AUD/USD finished the day at .7668, up 0.0034 or +0.44% and the NZD/USD closed at .7033, up 0.0018 or 0.26%.

In the U.S. on Wednesday, the greenback was supported by comments from Chicago Fed President Charles Evans, who said he was in line with most of his colleagues in supporting at least two more rate hikes this year.

Economic reports were scarce with total mortgage application volume essentially flat, falling just 0.8 percent from the previous week. A small drop in interest rates did nothing to spur refinances.

U.S. existing home sales rose 5.5 percent for the month and is 2.6 percent higher compared with February 2016. Investors were looking for a 2.3% increase.

Forecast

Greater demand for higher risk assets and weaker U.S. interest rates could continue to underpin the AUD/USD and NZD/USD on Thursday.

Speculation that the U.S. House Republicans will be able to get their act together before taking on tax reform and increased fiscal spending may be helping to support the Aussie since this should have an effect on demand for iron ore.

The lack of fresh domestic data is causing the New Zealand Dollar to drift inside a tight range. Conditions may be building for a breakout move, but the catalysts are unclear at this time. The general consensus from investors is that it will come from overseas.

The Australian Dollar could remain strong on Thursday if it continues to get support from stronger commodity prices, declining U.S. and European bond yields, and quarter-end market flows.

In the U.S. markets on Thursday, investors will get the opportunity to react to the third release of U.S. Q4 GDP and weekly jobless claims figures. Investors will also hear from Fed officials Mester, Kaplan, Williams and Dudley.

New York Fed president William Dudley is probably going to be the most interesting because he is a permanent voter on the Federal Open Market Committee. He is expected to talk about current financial conditions and monetary policy.