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AUD/USD and NZD/USD Fundamental Daily Forecast – Optimism over Trade Deal Underpinning Aussie; Profit-Takers Hitting Kiwi

James Hyerczyk

The Australian and New Zealand Dollars are trading mixed on Wednesday with the Aussie posting a solid performance and the Kiwi taking a hit. Without digging into the fundamentals yet, the price action in the two currencies seems to be reactions to key technical levels. For the Australian Dollar, the currency is bouncing off a 50% support level at .6800. The New Zealand Dollar, on the other hand, is finding resistance at a long-term Fibonacci level at .6567.

At 09:12 GMT, the AUD/USD is trading .6824, up 0.0016 or +0.23% and the NZD/USD is at .6537, down 0.0009 or -0.13%.

Australian Dollar

Reuters writes, “Australian consumer sentiment has taken a turn for the worse in December amid worries about the economic outlook and family finances, a troubling omen for the Christmas shopping season.”

On Wednesday, the Melbourne Institute and Westpac Bank index of consumer sentiment fell 1.9% in December, from November when it jumped 4.5%. The index was down a hefty 8.9% from a year earlier, and at 95.1 indicated pessimists continued to outnumber optimists.

The report also showed the index of whether it was a good time to buy a major household item fell 2.1% in the month. This is not good news for retailers because it suggests cash from lower interest rates and tax rebates was still not being spent. The index came in at 115.4, well below its long-run average of 127.

Westpac chief economist Bill Evans noted the survey showed a pattern of sliding in months where the RBA cut rates, only to bounce the month after, suggesting consumers had been spooked by the moves, according to Reuters.

When asked about the news on interest rates, 30% of respondents saw it as favorable and 70% as unfavorable.

“This is further evidence that the rate cuts in this cycle have had a much less positive impact on consumers than in past cycles,” Evans said.

Daily Forecast

The Australian Dollar is trading higher on Wednesday despite a bearish report from Westpac. This suggests traders are likely being influenced by optimism over U.S.-China trade relations.

The New Zealand Dollar could be weakening on profit-taking after a big seller continued to successfully defend the major technical level at .6567. Traders may not want to buy strength at current levels and could be playing for a pullback into a support area.

Trade Talk News

The latest news has The Wall Street Journal reporting Tuesday that the U.S. plans to delay slapping China with additional tariffs as both sides try to work out the agreement.

Although the current price action suggests the markets now assume or anticipate that some form of phase one deal will be signed, the negotiations appear to be going down to the wire.

Fed Expected to Hold Rates Steady

According to CNBC, “The Fed is expected to conclude its December meeting at 19:00 GMT on Wednesday by signaling it remains on hold for the time being and is monitoring economic developments.”

“Federal Reserve Chairman Jerome Powell is also expected to vow to do whatever it takes to keep the short-term lending market stable as year-end approaches and banks move to spruce up their balance sheets and make them look safer for regulatory purposes.”

“The Fed could give a nod to an improved economy and lower unemployment, following Friday’s blowout November jobs report. “

The Aussie and Kiwi could weaken later in the session if the tone of the Fed’s monetary policy statement is extremely hawkish.

This article was originally posted on FX Empire