Yahoo Finance AUD/USD and NZD/USD Fundamental Daily Forecast – Pressured by Weaker Global Equity Markets
The Australian and New Zealand Dollars are trading lower after giving up earlier gains. Weighing on the Aussie and Kiwi is lower demand for higher-risk assets with stocks down in Asia.
At 0424 GMT, the AUD/USD is trading .7381, down 0.0026 or -0.36% and the NZD/USD is at .6774, down 0.0004 or -0.06%.
Oversold short-term technical conditions gave the Australian and New Zealand Dollars a boost early in the session, but that move was short-lived amid declines in major Asian markets. On the first trading day of the new quarter, heavy losses were recorded in China ahead of a looming deadline when tariffs from both Washington and Beijing are scheduled to take effect.
In China, the Shanghai Composite fell 1.13 percent, while the smaller Shenzhen Composite lost 0.5 percent. In Australia, the S&P/ASX 200 erased early gains and hovered around unchanged. In Japan, the Nikkei 225 was down about 0.95 percent, despite a weaker Japanese Yen.
Longer-term, Aussie and Kiwi investors are expressing a bearish mood because of the widening divergence between the monetary policies of the hawkish U.S. Federal Reserve and the dovish Reserve Bank of Australia and the Reserve Bank of New Zealand.
Over the short-run, investors are more concerned over trade tensions between the U.S. and its trading partners, most notably China. U.S. tariffs on $34 billion of Chinese products are expected to take effect on July 6, with China set to retaliate with duties of its own on the same value of American goods.
Uncertainty on trade policy and fears that retaliation could intensify to the point that domestic growth is negatively affected, have weighed on Australian and New Zealand Dollar investor sentiment in recent weeks.
In other news, over the week-end, the private Caixin/Markit PMI for China came in at 51.0 for the month of June, in line with expectations. The official manufacturing Purchasing Managers’ Index declined to 51.5, missing expectations of 51.6 in a Reuter’s poll, although the figure still came in above the 50-point level indicating growth.
Forecast
Based on the early price action on Monday, it looks like the direction of the AUD/USD and NZD/USD will be determined by investor demand for risk. The Forex pairs are likely to remain under pressure all session as long as global equity markets continue to fall.
It really doesn’t matter what the story is, the driving force at this time in the markets is risk exposure.
Later today, investors will get the opportunity to react to the latest economic data from the United States.
At 1345 GMT, Final Manufacturing PMI is estimated at 54.6, unchanged. The major report for the day will be released at 1400 GMT. ISM Manufacturing PMI is expected to come in at 58.2, slightly below the previously reported 58.7.
Also at 1400 GMT, look for reports on Construction Spending (+0.5% versus +1.8%) and ISM Manufacturing Prices (74.3 versus 79.5).
The Aussie and the Kiwi will continue to be pressured if the ISM Manufacturing PMI report comes in better than expected.
This article was originally posted on FX Empire
