AUD/USD and NZD/USD Fundamental Daily Forecast – Volume Expected to Be Light, Possible Two-Sided Trade

The Australian and New Zealand Dollars are trading mixed early Monday. Both markets rallied shortly after the opening in reaction to Friday’s weaker Treasury yields and U.S. Dollar. Traders were responding to a speech by Fed Chair Janet Yellen on Friday that was perceived as dovish.

At 0520 GMT, the AUD/USD is trading .7933, up 0.0027 or +0.03% and the NZD/USD is nearly flat at .7234, down 0.0042 or -0.06%.

On Friday, Yellen gave a speech at the central bankers’ symposium at Jackson Hole, Wyoming. She stuck to the script and refrained from talking about monetary policy. This led investors to label the speech as dovish.

No one really expected Yellen to address future interest rate hikes, but some thought she’d mention her concerns over low inflation and perhaps announce the start of the Fed’s plan to begin trimming its massive $4.5 trillion balance sheet after the September FOMC meeting.

Yellen also sent a message to President Trump, saying that if he re-nominates her as Federal Reserve Chair, she will not turn her back on the raft of U.S. financial reforms that Republicans want to roll back.

Federal Reserve Governor Jerome Powell also said low inflation and a strong labor market in the United States are allowing the Federal Reserve to be “patient” about when it next raises interest rates.

Dallas Federal Reserve Bank President Robert Kaplan repeated his call for patience on raising interest rates any further, but called for the speeding up of the reduction of the Fed’s balance sheet.

All of these comments helped boost the AUD/USD and NZD/USD on Friday.

Forecast

There were not major reports from Australia or New Zealand on Monday so after the reaction to Yellen’s comments on Friday, there is not much to move the markets until 1230 GMT when the U.S. releases its latest numbers on Goods Trade Balance and Preliminary Wholesale Inventories.

The Goods Trade Balance report is expected to come in at -64.5 billion and Preliminary Wholesale Inventories are expected to show a 0.3% increase.

There are three events this week that should move the Aussie and the Kiwi. They are the announcement of the President’s tax reform plan, the release of the quarterly U.S. Preliminary GDP report and Friday’s U.S. Non-Farm Payrolls report.

Volume is expected to remain thin due to the summer vacation season. Next Monday is also a U.S. bank holiday. Therefore, the price action could be exaggerated as well as two-sided.