AUD/USD and NZD/USD Fundamental Daily Forecast – Kiwi Jumps on Strong Retail Numbers; Fed Minutes on Tap

The Australian and New Zealand Dollars are trading mixed early Wednesday. Aussie traders are showing almost no reaction to solid economic data, but may be reacting to a speech by RBA Assistant Governor Debelle. Kiwi investors are reacting positively to stronger-than-expected retail sales data. Investors are also monitoring risk appetite today in the wake of early weakness in U.S. equity markets.

At 0455 GMT, the AUD/USD is trading .7355, down 0.0011 or -0.15% and the NZD/USD is at .6704, up 0.0007 or +0.10%.

Early in the session, the Australian MI Leading Index came in flat, however, the previous month was revised upward to 0.1%.

In other news, Australia’s inflation rate is expected to slow in the third quarter, but there is uncertainty about how long it will last, leaving the Reserve Bank of Australia reluctant to consider raising interest rates anytime soon.

Speaking at a luncheon with economists on Wednesday, RBA Deputy Governor Guy Debelle, said he expects the forces cooling off inflation to abate, but added that, “there is uncertainty about how much longer they will persist.”

“We would like to be more confident that inflation will be sustained at a rate consistent with the target,” he said.

In New Zealand, on Tuesday, the GDT Price Index fell 3.6%. However, things picked up early Wednesday with the release of the quarterly Retail Sales report.

Retail sales in New Zealand gained a seasonally adjusted 1.1 percent on quarter in the second quarter of 2018, Statistics New Zealand said on Wednesday. This beat the forecast for an increase of 0.3 percent, which would have been unchanged from the three months prior following an upward revision from 0.1 percent.

Forecast

Today’s price action in the AUD/USD and NZD/USD is being impacted by the economic data. Talk of lower inflation is driving down the Aussie, and a surprise improvement in retail sales is providing support for the Kiwi.

Despite the early strength, the direction of the Aussie and Kiwi the rest of the session is likely to be determined by technical factors and U.S. economic data.

Technically, the direction of the AUD/USD will be determined by trader reaction to a retracement zone at .7327 to .7357. A sustained move under .7327 will indicate the return of sellers. A sustained move over .7357 will indicate the short-covering is likely to continue. The direction of the NZD/USD will be determined by trader reaction to the 50% to 61.8% zone at .6697 to .6734.

Fundamentally, later today, investors will get the opportunity to react U.S. Existing Home Sales, which are expected to come in slightly better at 5.40M. However, the major news event will be the FOMC Meeting Minutes at 1800 GMT. The minutes could be a market moving event if they show the Fed discussed limiting the number of rate hikes later this year to just one in the wake of a potential economic slowdown due to the impact of the tariffs.