AUD/USD and NZD/USD Fundamental Forecast – October 6, 2016

The Australian and New Zealand Dollars were under pressure most of the session on Wednesday, a result of strong U.S. economic data that helped lift U.S. bond yields, making the U.S. Dollar a more attractive investment. Losses were limited because of increased demand for risk caused by a rally in crude oil and higher equity markets.

The AUD/USD closed at .7621, up 0.0002 or +0.03%. The NZD/USD finished at .7172, down 0.0035 or -0.49%.

The Australian Dollar caught a bid early in the session in response to yesterday’s better than expected 0.4% rise in retail sales. The New Zealand Dollar fell to a seven-week low as weaker prices at the latest GlobalDairy Trade auction weighed on the outlook for the country’s biggest export commodity, and on speculation the European Central Bank may start unwinding is quantitative easing program.
Traders posted a negative reaction to a weaker-than-expected ADP private sector jobs report that came in at 154K, below the 166K estimate. The ISM Non-Manufacturing PMI report came in at 57.1, blowing away the 53.1 estimate. U.S. Factory Orders also beat the -0.4% estimate with at 0.2% read.

The Thursday before the release of the U.S. Non-Farm Payrolls report is usually a pretty slow one for traders. However, we could get some movement with the release of the latest Australian Trade Balance report at 0030 GMT. It is expected to come in at -2.32 billion. This would be higher than the previous -2.12 billion read. A better-than-expected number would be supportive for the AUD/USD and could serve as proof that the currency’s high price has not been a negative influence on exports.

There are no major reports from New Zealand but traders continue to price in a rate cut for November. In the meantime, investors will get the opportunity to react to the U.S. Challenger Jobs Cuts report and the Weekly Unemployment Claims number. Traders are not expected to react to these reports.
We’re looking for below average volume and volatility today as investors await Friday’s jobs report. Early estimates have traders betting the economy added 171K jobs in September while holding the unemployment rate at 4.9%. Average hourly earnings are expected to come in at 0.2%. This is the key number to watch because the Fed has expressed concerns about labor-market slack. A better-than-expected read will greatly increase the chances for a December rate hike.

Economic Calendar