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AUD/USD and NZD/USD Fundamental Daily Forecast – Weaken as Traders Prepare for Additional Rate Cuts

James Hyerczyk

The Australian and New Zealand Dollars are hovering near their lows of the after early session short-covering and position-squaring failed to attract enough counter-trend buyers to sustain the move. The Aussie is currently in a position to snap its two-week winning streak, while the Kiwi is set up to challenge its August 24, 2015 main bottom at .6207.

At 18:27 GMT, the AUD/USD is trading .6765, down 0.0028 or -0.41% and the NZD/USD is at .6260, down 0.0040 or -0.64%.

Australian Dollar traders attempted to buck this week’s trend early in the session, using a test of a retracement zone at .6791 to .6767 as an excuse to book profits and attempt to start a meaningful short-covering rally. But this idea never gained traction amid overwhelmingly weak fundamentals.

After hitting its highest level since July 31 last week at .6895, the AUD/USD moved sideways for a couple of days before plunging to its lowest level since September 4 on Friday.

Early in the week, the Aussie was capped by the minutes of the Reserve Bank of Australia (RBA) monetary policy meeting, which showed policymakers would consider further policy easing if needed to support growth and added that it was reasonable to expect an extended period of low interest rates to achieve employment and inflation goals.

Support began to erode at mid-week when the Australian Bureau of Statistics reported that the unemployment rate in August ticked up to 5.3% from 5.2%, where it had been parked for several months. The bearish element of the report was the 15,500 drop in the number of full-time workers.

The jobs data renewed calls for an RBA interest rate cut. With futures traders pricing in an 80% chance of a rate cut on October 1, up from 42% at the start of the week.

Sellers returned to the NZD/USD on September 12 when the buying dried up inside a key technical retracement zone at .6429 to .6466, with the rally stopping at .6451. It’s been all downhill since then with sellers taking out the September 3 bottom at .6269 earlier today.

A report on New Zealand GDP came in as expected earlier this week, but it was weaker than the previous quarter, which means the Reserve Bank of New Zealand (RBNZ) is likely to cut its Official Cash Rate again before the end of the year.

After surprising traders with a 50 basis point rate cut in August, many traders thought the RBNZ would pass on a September 24 rate cut and trim on November 12 instead. However, this week’s price action indicates that traders aren’t taking any chances with another surprise and have already begun to price in a rate cut for next week.

This article was originally posted on FX Empire