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AUD/USD and NZD/USD Fundamental Daily Forecast – Could Weaken on Better-Than-Expected U.S. Producer Inflation

The Australian and New Zealand Dollars finished higher against the U.S. Dollar in a volatile trading session on Wednesday. Both currencies were under pressure early in the session due to rising U.S. Treasury yields. However, the Aussie and Kiwi reversed to the upside after a report said that China was ready to slow or halt its purchase of U.S. Treasurys. The news surprised traders sending them scrambling into lower-risk assets.

The AUD/USD finished the session at .7841, up 0.0018 or +0.22% and the NZD/USD settled at .7198, up 0.0038 or +0.53%.

NZDUSD
Daily NZD/USD

Forecast

Early Thursday, the Aussie is trading higher and the Kiwi is trading mixed. At 0718 GMT, the AUD/USD is at .7868, up 0.0027 or +0.35% and the NZD/USD is trading .7196, down 0.0002 or -0.03%.

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Additionally, the Australian Dollar is attempting to breakout over last week’s high at .7874 and the October 13 main top at .7897. Upside momentum could increase on the moves so investors should watch for a possible acceleration to the upside.

The New Zealand Dollar is straddling a key technical retracement level at .7188. On Wednesday, it resumed its uptrend when it broke through the October 17 main top at .7201. A sustained move over yesterday’s high at .7229 could trigger an acceleration to the upside.

AUDUSD
Daily AUD/USD

The catalyst behind the surge in the Australian Dollar is a better-than-expected retail sales report. Australian retail sales posted their biggest monthly rise in four years in November as consumers spent large amounts of money on Apple iPhones and Black Friday promotions.

According to the Australian Bureau of Statistics (ABS), retail sales jumped 1.2 percent in November from October, when they rose a solid 0.5 percent. That was three times the market forecast and the steepest gain since early 2013.

Consumer spending has been under pressure from record-high household debt and sluggish wage growth, one reason the Reserve Bank of Australia is in no rush to raise interest rates from record lows.

Despite the good news, the futures markets are still implying around a 50-50 chance of a rate hike by September and are not fully priced for a rise from 1.50 percent until February next year.

On Friday, investors will get the opportunity to react to a slew of U.S. economic data including the Producer Price Index, Weekly Unemployment Claims and the Federal Budget Balance. FOMC Member William Dudley is also scheduled to speak late in the trading day.

The U.S. Dollar could rise if producer inflation comes in higher than the 0.2% estimate.

This article was originally posted on FX Empire

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