AUD/USD and NZD/USD Fundamental Daily Forecast – Kiwi Traders React to Trump’s Trade Imbalance Comments

The New Zealand Dollar traded lower on Wednesday and inside the previous day’s range. The price action suggests investor indecision and impending volatility. It could also be indicating that the Kiwi is still being controlled by the short-sellers despite Tuesday’s sharp rise and last Thursday’s dramatic reversal to the upside.

At 2041 GMT, the NZD/USD is trading .7283, down 0.0047 or -0.06%.

Most of today’s price action was steered by trader reaction to President Trump’s trade plans in response to a U.S. trade gap which reached a 9-year high.

Early in the day, Trump tweeted that he’s asked China to reduce its trade imbalance with America after a report showed the U.S. trade deficit at its highest level since October 2008.

Coming off of a trading session where investors reacted violently to the resignation of Trump’s key economic adviser Gary Cohn, who held opposition to the president’s plan to impose tariffs on steel and aluminum imports to protect U.S. industry, Trump continued to push forward with his ambitious trade plans.

Overnight, Trump tweeted that he’d asked China to cut its trade imbalance with the U.S. by $1 billion while figures showed the U.S. January trade deficit was a wider-than-expected $56.6 billion and the gap with China jumped 17 percent to $36 billion.

Forecast

Trump’s request to China to cut the deficit with the U.S. by $1 billion dollar was an unusual request because the amount is so small. It actually looks like a rounding error. However, it may be a sign that Washington’s appetite for a trade war is actually not that high, which may be the reason why the U.S. Dollar strengthened and the Kiwi weakened on Wednesday.

Traders are now preparing for the quarterly New Zealand Manufacturing Sales report at 2145 GMT. It is not expected to offer any direction to the NZD/USD. The same applies for the report on Electric Card Retail Sales on Thursday.

Reports in the U.S. on Thursday will feature Challenger Job Cuts and Weekly Unemployment Claims. Trade war news may take a backseat on Thursday as most of the price action may be dictated by comments from European Central Bank President Mario Draghi. On Friday, the U.S. reports data on the labor market.