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AUD/USD and NZD/USD Fundamental Weekly Forecast – Fed Projections, Aussie Jobs, RBNZ Rate Statement on Tap

By:
James Hyerczyk
Updated: Mar 19, 2018, 05:51 UTC

The major market driving events this week will be the Federal Open Market Committee’s (FOMC) Economic Projections, FOMC Statement, Federal Funds Rate decision and FOMC Press Conference.

AUD/USD and NZD/USD

Australian and New Zealand Dollars fell sharply against the U.S. Dollar last week amid concerns about a U.S. shift towards increased protectionism.

The AUD/USD settled at .7710, down 0.0136 or -1.73%. Meanwhile, the NZD/USD finished the week at .7211, down 0.0067 or -0.93%.

AUDUSD
Weekly AUD/USD

The selling began after President Trump fired Secretary of State Rex Tillerson and rumors surfaced that Trump was considering tariffs against China. According to reports, the package could include indefinite tariffs and investment restrictions. Trump could impose tariffs on $60 billion of Chinese goods, Reuters reported, citing a source.

The Kiwi was pressured late in the week by weaker than expected Gross Domestic Production data, which reduced the odds of a sooner-than-expected rate hike by the Reserve Bank of New Zealand and rumors that President Trump had decided to fire National Security Adviser H.R. McMaster.

In other economic news, U.S. consumer inflation came in at 0.2%, meeting expectations but coming in well below the previous 0.5%. Core CPI also matched the 0.2% forecast, but came in below the previously reported 0.3%. The benign numbers probably mean the Fed will limit the number of rate hikes in 2018 to three.

Core Retail Sales disappointed investors with a 0.2% reading. The forecast called for an increase of 0.4%. The previous month was revised higher to 0.1%. Retail Sales were down 0.1%. Traders were looking for 0.3%. The previous month was revised higher to -0.1%.

Producer inflation rose 0.2%, exceeding expectations. Building permits were 1.30M versus a 1.32M forecast.

NZDUSD
Weekly NZD/USD

Forecast

The major market driving events this week will be the Federal Open Market Committee’s (FOMC) Economic Projections, FOMC Statement, Federal Funds Rate decision and FOMC Press Conference.

Traders in the Fed fund futures market are betting an 86% chance of a rate hike at the Fed’s meeting on March 21. This has already been priced into the market. Therefore, the key news that will move the AUD/USD and NZD/USD will be whether the FOMC members forecast two or three more rate hikes this year.

One more rate hike should be bullish for the AUD/USD and NZD/USD while three more rate hikes should be bearish for the Forex pairs. Two more rate hikes is what is expected, bringing a total of three by the end of the year.

Traders will also continue to monitor rising risk aversion as investors express concerns about a possible trade war and more changes in the White House staff.

In Australia, the Reserve Bank of Australia minutes are expected to reveal that the central bank expects interest rates to remain low for a long time.

The Employment Change report is forecast to show the economy added 20.3K jobs in February. The Unemployment Rate is expected to remain at 5.5%.

In other news, the Reserve Bank of New Zealand will release its latest interest rate decision and rate statement. Traders see no reason for acting Reserve Bank Governor Grant Spencer to lift the official cash rate in his final review on Thursday and do not expect him to deviate from the line that rates are on hold for the foreseeable future given the lack of inflation. The consensus expects the OCR to stay at a record low 1.75 percent.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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