Both the Australian Dollar (AUD) and New Zealand Dollar (NZD) strengthened against the US Dollar (USD) amid shifting risk sentiment driven by developments in the Middle East. The AUD/USD pair rallied by over 0.50%, trading at 0.6918, as risk appetite improved, though gains were limited by Iran's rejection of a ceasefire deal, which led traders to trim long positions in the pair [1]. Similarly, NZD/USD traded with a bullish tone near 0.5710, supported by market optimism around potential diplomatic efforts and de-escalation in the region, despite strong rhetoric from Donald Trump regarding the Strait of Hormuz [2].
US economic data contributed to the USD's weakness. The ISM Services PMI for March fell from 56.1 to 54.0, missing economists' estimates, while the Prices Paid sub-component surged to 70.7, its highest since 2022, due to higher petrol prices [1][2]. The softer-than-expected ISM Services data, particularly a decline in employment, and a modest pullback in US yields pressured the USD further [2]. The US Dollar Index (DXY) briefly edged above 100.00 before reversing course and ending down 0.20% at 99.98 as traders digested the news [1].
In Australia, trading resumed after a four-day weekend, with the S&P Global Services PMI for March expected to remain at 46.6, indicating continued contraction in the services sector [1]. A poll by the Australian Financial Review showed that most of 38 economists surveyed expect the Reserve Bank of Australia (RBA) to raise interest rates to 4.35%, with some banks forecasting three more hikes by June next year [1]. In New Zealand, the NZD found support ahead of the Reserve Bank of New Zealand's (RBNZ) policy decision, with markets widely expecting rates to remain unchanged, though any shift in guidance could impact the currency [2].
Technical analysis for AUD/USD shows a mildly bullish near-term bias, with the pair trading above clustered rising support lines and simple moving averages around 0.70, reinforcing the broader uptrend [1]. For NZD/USD, the near-term bias is mildly bearish, as the pair remains below key moving averages, with resistance at 0.5721 and 0.5730, and support at 0.5712 and 0.5706 [2].
Looking ahead, traders are monitoring upcoming US data releases, including Durable Goods Orders, FOMC minutes, GDP, Jobless Claims, and inflation prints, as well as the RBNZ policy decision and Australian inflation data, for further market direction [1][2].
CONCLUSION
The AUD and NZD both benefited from improved risk sentiment and a weaker US Dollar, though gains were tempered by ongoing Middle East uncertainty and technical resistance. Central bank decisions in Australia and New Zealand, along with key US economic data, remain in focus for traders. Market sentiment is cautiously optimistic but sensitive to geopolitical and economic developments.