Yahoo Finance AUD/USD and NZD/USD Fundamental Daily Forecast – Rally Stalls on Profit-Taking after Sixteen Session Run
The Australian and New Zealand Dollars are trading lower Thursday after giving up earlier gains. The price action suggests profit-taking and position-squaring may be taking place after both currencies hit multi-month highs. Technical factors could also be weighing on the Aussie and the Kiwi amid fresh concerns over overbought conditions.
At 05:13 GMT, the AUD/USD is trading .7507, down 0.0009 or -0.12% and the NZD/USD is at .7193, down 0.0008 or -0.11%.
Early Session Strength Before Reversal to Downside
Earlier in the session, the Australian and New Zealand Dollars advanced to new multi-month highs against the greenback as local benchmark yields climbed, the U.S. Dollar inched lower, and investor optimism drove demand for risk-friendly currencies.
The kiwi “retains upward momentum,” wrote analysts at Westpac in a note, since, “The U.S. Dollar has retreated, global risk sentiment is rising, and NZ-U.S. yield spreads have risen significantly.”
As for the Australian Dollar “we remain torn between the near-term positives of super strong commodity prices and a weakening U.S. Dollar, and the medium term view that global strength will slow sharply into Q4,” they said.
Australia Business Conditions at Record High: National Australia Bank
Australia’s business conditions rose to a record high in the second quarter, while confidence eased slightly, survey data from the National Australia Bank (NAB) showed on Thursday.
The business conditions index rose strongly by 12 points to a record 32 points in the second quarter. Meanwhile, the business confidence index dropped to 17 from 19 in the preceding quarter.
Business conditions were still in negative territory in the third quarter of 2020, and now, three quarters later, they were at a record high, a testament to how rapid the recovery has been from last year’s recession, Alan Oster, NAB group chief economist, said. “A pleasing aspect of the survey is how broad-based the strength in conditions and confidence was – whether you look by industry or by state they are all above average, and in many cases well above,” said Oster.
The survey was conducted between May 18 and June 10, so responses only partly capture any impacts from the Victorian lockdown that effectively started on May 28.
Daily Forecast
The Aussie and Kiwi have rallied from one-month lows hit a few weeks ago when fears about slowing economic growth were high on investors’ minds, driving a rush for safe havens, especially the U.S. Dollar.
This line of thought has since reversed as investors rushed into commodities and other riskier assets, dampening the U.S. Dollar’s safe-haven appeal. Additionally, New Zealand Dollar traders have increased bets on more aggressive rate hikes by the Reserve Bank (RBNZ) while Fed policy is still unclear. Meanwhile, traders are also betting the Reserve Bank of Australia (RBA) will raise rates before 2024, a move they continue to deny will take place.
What we’re looking at today is simple profit-taking, in my opinion.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire