AUD/USD and NZD/USD Fundamental Daily Forecast – Weaker U.S. Treasury Yields Making Aussie, Kiwi More Attractive

Strong domestic economic news continued to support the Australian and New Zealand Dollars on Friday. The currencies are also being supported a widening of the interest rate differential which is being fueled by the Fed’s “dovish” outlook for interest rates in 2018 and 2019.

At 1102, the AUD/USD is trading .7678, up 0.0015 or +0.19% and the NZD/USD is at .7030, up 0.0048 or +0.68%.

The New Zealand Dollar is surging against the U.S. Dollar on the news that NZ Superannuation Fund chief Adrian Orr was named as next governor of the Reserve Bank. Traders are buying the Kiwi because they believe the new governor is more acclimated with the business community and possibly more hawkish than the incumbent.

Finance Minister Grant Robertson said Orr came with the unanimous recommendation of the Reserve Bank’s board and had “the technical and leadership qualities” to be governor and “the skills necessary to successfully lead the bank through a period of change”.

The Australian Dollar is being supported by strong Australian job figures. The ABS’s latest job numbers blew away the estimates. The data showed that 62,000 new jobs were created in November when only 18,000 were expected. The Australian Unemployment Rate stayed at 5.4%.

The Fed raised its benchmark rate by a quarter point to a range of 1.25-1.50 percent on Wednesday. The central bank projected three more rate hikes in both 2018 and 2019, unchanged from its September forecasts. Recently, a few Fed officials had talked about cutting the number of rate hikes to two. Others had speculated the Fed could raise its interest rate projection for next year to four rate hikes.

The rate hike was widely expected, but the dollar came under pressure after the Fed’s monetary policy announcements as the U.S. central bank kept its interest rate projections steady rather than revising them higher.

The NZD/USD is currently testing a key retracement zone at .6990 to .7040. Trader reaction to this area will determine the near-term direction of the Forex pair. Based on the earlier price action, the inability to overcome .7040 and a move under .6990 will indicate the return of sellers.

The key upside target for AUD/USD traders is .7699 to .7746. Sellers may show up on a test of this zone.