AUD/USD and NZD/USD Fundamental Daily Forecast – Pressured by Renewed US-China Tensions

The Australian and New Zealand Dollars are edging lower early Friday in limited activity as rising Sino-U.S. tensions and worries about a second wave of coronavirus infections rattled investors.

As hopes wavered for a quick global recovery from the pandemic, the trade-sensitive Australian Dollar was poised to snap five weeks of gains with a 1% drop, its first weekly loss since early April. The Kiwi is being weighed down by talk of negative interest rates next year.

At 06:03 GMT, the AUD/USD is trading .6456, down 0.0004 or -0.07% and the NZD/USD is at .5993, down 0.0003 or -0.05%.

According to Reuters, the Antipodean pair, like other majors, have struggled for traction in May as investors and authorities weigh optimism about easing virus containment measures against the risk of more infections and the sheer scale of economic damage already wrought.

“The market is sort of in a wait-and-see mode at the moment, waiting to see in particular whether U.S.-China trade tensions really do escalate,” said Rodrigo Catril, senior foreign exchange analyst at National Australia Bank.

Chinese Data Shows Risks Remain

Gradual re-opening of the world’s economies has come with a dawning of how deeply the pandemic has damaged supply chains, labor markets and global demand, Reuters wrote.

Data on Friday showed China’s April industrial output beating expectations but consumption was stuck in the doldrums.

Chinese Industrial Production came in at 3.9%, better than the 1.5% forecast and the -1.1% previous read. Fixed Asset Investment came in at -10.3%, worse than the -9.8% forecast, but better than the previously reported -16.1%.

Chinese Retail Sales were down 7.5%, worse than the -5.9% estimate, but better than the previously reported -15.8%. Chinese Unemployment rose to 6.0% from 5.9%, worse than the 5.8% forecast.

NZ Manufacturing Sector Activity at Record Low

New Zealand’s manufacturing sector fell to its lowest ever recorded levels of production, with economists saying this is rock bottom.

The BNZ-Business New Zealand Performance of Manufacturing Index for April was 26.1. The previous low of 36.1 was recorded in November 2008 during the Global Financial Crisis.

BNZ senior economist Doug Steel said April’s performance was never going to be anything but awful. “Unsurprisingly, extreme weakness was seen across the board in April whether looking by region, by sector, or by firm size.”

Daily Forecast

The weak performances by the AUD/USD and NZD/USD reflect three major concerns:  a second wave of coronavirus cases, collateral damage from the shutdowns resulting in a delayed or very slow recovery; and an escalation in U.S.-China trade tensions.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.