Yahoo Finance AUD/USD and NZD/USD Fundamental Weekly Forecast – Momentum Being Driven by Appetite for Risk
The Australian and New Zealand Dollars were supported last week by rising commodity prices such as metals and crude oil. Investors primarily ignored the upbeat U.S. economic data, the hawkish Fed minutes and rising U.S. Treasury yields. Gold futures finished the week up 0.99% and crude oil gained 1.69%.
The AUD/USD settled the week at .7862, up 0.0060 or +0.76% and the NZD/USD finished at .7167, up 0.0081 or +1.15%.
The U.S. dominated the news last week.
The Fed minutes revealed the usual divided central bank members, but they also tipped the scales toward the more hawkish FOMC members.
The Fed raised rates a quarter-point at its December meeting, with most FOMC officials backing the continued path of gradual rate hikes. According to the minutes, some Fed members were concerned about low inflation. Others thought the tight labor market and tax hikes could help boost inflation.
In other news, ISM Manufacturing PMI beat the 58.1 forecast with a read of 59.7. The ADP Non-Farm Employment Change report showed the private sector of the economy added 250K new jobs in December. Weekly Unemployment Claims, however, came in higher than expectations at 250K.
On Friday the U.S. Labor Department reported that the U.S. economy added a disappointing 148,000 jobs in December while the unemployment rate held at 4.1 percent. Economists were looking for non-farm payrolls to grow by 190,000. The total was well below the November pace of 252,000, which was revised up from the initially reported 228,000.
The bright spot in the U.S. December employment report was the rise in wage growth. Average hourly earnings rose 9 cents, or 0.3 percent, in December after gaining 0.1 percent in the prior month. This news lifted the annual increase in wages to 2.5 percent from 2.4 percent in November.
Finally, ISM Non-Manufacturing PMI came in below expectations at 55.9.
In Australia, the Trade Balance came in worse than expected at -0.63 billion. Traders were looking for a surplus of 0.55 billion. The previous data was revised to -.30 billion.
Forecast
The Australian and New Zealand Dollars started the year underpinned by strong investor appetite for risk, short-covering, optimism over upcoming economic data and a weaker Greenback. It’s a momentum driven market at this time, just like gold, crude oil and stocks.
We know all the previous resistance areas so we can anticipate where the rally could begin slowing, but it doesn’t make sense to stand in the way of a momentum driven rally. Therefore, we’re not going to tell you to sell the AUD/USD and NZD/USD until the rally stops. Why stand in the way of a powerful trend?
This week, investors will get the chance to react to a slew of data from the U.S. On Thursday, the key report is the Producer Price index. On Friday, the key data is the Consumer Price Index and Retail Sales.
Australia will release data on Retail Sales.
Don’t stand in the way of a momentum driven market. If you believe the Aussie and Kiwi are overpriced then let the major players step in first to stop the rallies. They have more money than you and can take the heat if they miss the top. Wait for a definite sign of a top before aggressively shorting
This article was originally posted on FX Empire
