Yahoo Finance AUD/USD and NZD/USD Fundamental Daily Forecast – Lower Treasury Yields, Higher Stocks Best Scenario for Aussie, Kiwi
The Australian and New Zealand Dollars plunged earlier in the session after a steady opening. The sell-off was triggered by the firing of a missile over Japan by North Korea. Although U.S. Treasury yields declined on the news, sending the U.S. Dollar lower, the Aussie and the Kiwi retreated because of a drop in demand for risky assets.
At 0821 GMT, the AUD/USD is trading .7958, down 0.0047 or -0.05% and the NZD/USD is at .7266, up 0.0010 or +0.14%.
In other news, HIA New Home Sales fell 3.7%, better than the previous 6.9% decline.
On Monday, the Aussie and the Kiwi posted solid gains after the U.S. Dollar weakened as investors continued to respond to Fed Chair Janet Yellen’s dovish speech on Friday at the central bankers’ symposium at Jackson Hole, Wyoming.
Also pressuring the U.S. Dollar were concerns over the potential economic impact on the U.S. economy due to the damage caused by Hurricane Harvey on the Texas Gulf Coast.
Forecast
The direction of the AUD/USD and NZD/USD today will be determined by two factors: U.S. Treasury yields and risk sentiment.
If U.S. Treasury yields continue to fall then the spread between Australian Government Bonds and U.S. Government Bonds and New Zealand Government Bonds and U.S. Government Bonds will widen. This will make the Australian and New Zealand Dollars more attractive investments.
However, gains will be limited if today is a “risk-off” day because both the Aussie and Kiwi are higher-yielding assets.
Later today at 1300 GMT, investors will get the chance to react to the latest S&P/CS Composite-20 HPI report. It is expected to come in at 5.6%. AT 1400 GMT, the Conference Board will release its latest Consumer Confidence report. It is expected to come in slightly below its previous report at 120.9.
Don’t worry about the news, but pay attention to the direction of U.S. 30-Year Treasury Bonds, 10-Year Treasury Notes and the major stock indices. Higher T-Bonds, higher T-Notes will be bullish for the Aussie and Kiwi, but a sharp break in the equity markets will limit their gains.
If a sell-off in the stock market is steep enough then the AUD/USD and NZD/USD could also turn lower for the session.
The most bullish scenario for the Forex pair will be lower yields and rising stocks.
This article was originally posted on FX Empire
