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AUD/USD and NZD/USD Fundamental Daily Forecast – Decision Time for Kiwi Bulls

James Hyerczyk

The Australian and New Zealand Dollars are trading higher on Friday. The Aussie is trading in a tight range for a third session after the Reserve Bank of Australia (RBA) left rates on hold Tuesday. The price action suggests investor indecision and impending volatility. The Kiwi is hovering around a major technical resistance level that could determine the longer-term direction of the currency.

At 08:18 GMT, the AUD/USD is at .6844, up 0.0013 or +0.18%. The NZD/USD is at .6567, up 0.0020 or +0.30%.

Australian Dollar News

This week’s economic data has not been kind to the Australian Dollar. On Wednesday, quarterly GDP came in at 0.4%, lower than the 0.5% forecast. On Thursday, Retail Sales were flat, below the 0.3% forecast. The Trade Balance was 4.50 Billion. Traders were looking for a reading of 6.50 Billion.

Earlier today, the Australian Industry Group (AIG)/Housing Industry Association Performance of Construction Index (PCI) report released on Friday said activity fell 3.9 points on the previous month to 40.0 – a decline that leaves the measure well below the 50-point mark separating expansion and contraction.

Slower growth means the RBA is going to have to cut rates again early next year.

“We have included an additional 25bp cut to the cash rate in our rate track. We now expect cuts in both February and June 2020 – taking the cash rate to 0.25%. At this point, we see an increased risk of a move to ‘unconventional’ policy in H2 2020 should the labor market deteriorate more significantly than we forecast,” says Alan Oster, chief economist at NAB, Australia’s largest bank.

Oster said Wednesday that “weak growth in the private sector will lead to higher unemployment and slower wages growth for Australians in the year ahead, which is tipped to further entrench the existing weakness in the quarterly inflation numbers. He says that once the RBA has cut the cash rate to 0.25% next June, it will have no choice but to begin thinking seriously about a currency-crushing quantitative easing (QE) program.”

New Zealand Dollar News

The NZD/USD has been bullish since Monday’s strong rally was fueled by talk of fiscal stimulus to boost the New Zealand economy. The Kiwi was also boosted after an unexpected rebound in Chinese manufacturing raised hopes of a brighter outlook for the world economy.

Daily Forecast

Most traders will be looking for fresh developments on the progress of U.S.-China trade relations. Some will be watching the U.S. Non-Farm Payrolls report. Since the jobs data is not likely to influence Fed policy at next week’s meeting, I don’t think we’re going to see much of a reaction to the numbers.

White House Economic Advisor Larry Kudlow will appear on CNBC’s “Squawk Box” later today. He’s reliable in my opinion so traders are going to pay attention to what he has to say about the chances of a trade deal before the December 15 deadline.

This article was originally posted on FX Empire