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The Australian and New Zealand Dollars posted a dramatic two-sided trade on Wednesday, mostly in response to investor appetite for risk. The roller-coaster ride started with a sell-off in response to a sharp break in European equity markets. It finished with a powerful reversal to the upside in U.S. equity markets.
The AUD/USD settled at .7715, up 0.0032 or +0.42% and the NZD/USD settled at .7305, up 0.0050 or +0.69%.
The shifts in investor sentiment were fueled by the prospect of a trade war erupting between the United States and China after the latter imposed fresh tariffs on 106 U.S. export products.
Early in the trading session on Wednesday, U.S. stocks plunged about 2%, however, the major indexes rebounded throughout the session before settling up 1% or higher. That move helped to reverse safe-haven buying in U.S. Treasuries and the Japanese Yen, helping to boost other risk assets such as the Aussie and the Kiwi.
Forecast
The Australian and New Zealand Dollars are trading mixed early Thursday as investors continue to look for signals from the global equity markets. Traders are still jittery about the possibility of an escalating trade war between the United States and China, but given Wednesday’s price action, they seem to be willing to make adjustments to major shifts in investor sentiment and technical momentum.
Essentially, investors seem to be driven by the bearish fundamentals, i.e. rising U.S. interest rates, but traders are reacting to the news and appear willing to trade both sides. In other words, they are embracing the volatility with no bias, they just like the action.
At 0409 GMT, the AUD/USD is trading .7711, down 0.0004 or 0.05% and the NZD/USD is at .7314, up 0.0009 or +0.12%.
Technically, the Aussie is still struggling to recover previous support levels. On the other hand, the Kiwi has changed its trend to up on the daily chart, suggesting more buyers than sellers at current price levels.
Australian Dollar traders may be reacting to today’s trade balance news. Australia posted a merchandise trade balance of A$825 million in February, the Australian Bureau of Statistics said on Thursday. That exceeded expectations for a surplus of A$725 million and was down from A$1.055 billion in January.
The New Zealand Dollar touched a three-week high earlier today, helped by a pickup in consumer confidence, a bigger-than-expected budget surplus and rising property values.
Recent indicators have painted a rosy picture of the NZ economy. Consumer confidence rose last month, according to the ANZ consumer confidence index, while the government’s operating surplus for the first eight months of the year, at $2.85 billion, topped the Treasury’s December forecast of $2.36 billion.