AUD/USD and NZD/USD Fundamental Daily Forecast – Aussie Poised to Post Best Annual Performance in Seven Years

The Australian Dollar posted another strong gain against the U.S. Dollar on Thursday, reaching its highest level since October 24. The currency was driven higher by rising commodity prices especially iron ore and copper. Additionally, the widening of the interest rate differential between Australian Government Bonds and U.S. Government Bonds was supportive.

The AUD/USD settled at .7797, up 0.0027 or 0.35%.

The Aussie is on track for a third straight week of gains on Friday, and its best annual performance in seven years. The latest move is being driven by optimism for global growth and strong commodity prices.

Traders said that surprising resilience in Chinese demand for commodities, including iron ore – Australia’s biggest export earner – has certainly helped. The mineral currently fetches more than US$70 a tonne after having been down around US$50 a few months ago.

Additionally, industrial bellwether copper is also surging into the end of the year, hitting a four-year peak and taking it up about 30 percent for 2017.

The New Zealand Dollar also posted a gain against the U.S. Dollar on Thursday. It is currently testing a major technical level at .7100 while trading at its highest level since October 19. If the upside momentum continues into the new year, it could reach its October 17 top at .7201.

The NZD/USD settled at .7087, up 0.0026 or +0.37%.

The kiwi is in a position to finish the year up about 2.3 percent. The gain comes as a pleasant surprise because just a short while ago, New Zealanders had to deal with a bout of political uncertainty when the country’s long-serving conservative government lost power.

Forecast

We expect another light volume day ahead of the long holiday week-end. The direction is uncertain. If trend traders maintain control then look for prices to rise. If long traders decide to book profits ahead of the long week-end then look for a reversal top.

The key issue at the start of the new year will be how long the Aussie and the Kiwi can sustain their current rallies given official U.S. interest rates are almost certain to move above Australia’s and New Zealand’s next year.