AUD/USD and NZD/USD Fundamental Analysis: All Eyes on the Fed

It is a quiet morning for the AUD/USD and the NZD/USD pairs. Consumer sentiment figures from New Zealand drew interest this morning.

After the larger-than-expected contraction in the New Zealand economy, a pickup in consumer sentiment would support a turnaround in the economy.

The Westpac Consumer Sentiment Index increased from 75.6 to 77.7 in Q1 versus an average of 108.8.  However, the devil was in the details. According to the Q1 survey,

• The current financial situation sub-index fell from -30.9 to -31.8 versus an average of -9.1.
• However, consumer expectations improved, with the expected financial situation sub-index rising from -12.6 to -3.8 (Average: 10.8).
• The 1-year economic outlook sub-index rose from -41.5 to -41.1 (Average: -4.0), while the 5-year economic outlook fell from -10.0 to -10.8 (Average: 27.0)
• Considering the negative sentiment, the good time to buy sub-index increased modestly from -27.1 to -24.2 (Average: 22.7).
• Living costs, mortgage rates, and the housing sector slump have weighed on consumer sentiment, which sits well below the long-run average.

The numbers suggest a continued pullback in spending that will further pressure the economy.

For the Aussie, there are no economic indicators to consider this morning, leaving investors to look ahead to the Fed.

Later today, the Fed will deliver its March interest rate decision and release the latest projections. There is unlikely to be a surprise 50 basis point Fed interest rate hike when considering the impact of the aggressive interest rate trajectory on US regional banks.

However, there is uncertainty over the policy outlook, placing a greater emphasis on the projections and the Fed Chair Powell press conference. With the RBA delivering a less hawkish policy outlook and the New Zealand economy contracting, we expect the FOMC projections and Fed Chair Powell to move the dial.

AUD/USD Price Action

The Aussie was up 0.08% to $0.66716. A mixed start saw the AUD/USD fall to an early low of $0.66603 before steadying.

Technical Indicators

The AUD/USD needs to move through the $0.6681 pivot to target the First Major Resistance Level (R1) at $0.6712 and the Tuesday high of $0.67262. A return to $0.67 would signal a bullish session. However, the Aussie Dollar would need risk-on sentiment to support a breakout day.

In case of a breakout session, the Aussie would likely test the Second Major Resistance Level (R2) at $0.6757. The Third Major Resistance Level (R3) sits at $0.6834.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.6635 in play. However, barring a Fed-fueled sell-off, the AUD/USD pair should avoid sub-$0.66. The Second Major Support Level (S2) at $0.6604 should limit the downside.

The Third Major Support Level (S3) sits at $0.6528.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The AUD/USD sits below the 50-day EMA, currently at $0.66750. The 50-day EMA slipped back from the 100-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals.

A move through the 50-day EMA ($0.66750) would give the bulls a run at the 100-day EMA (0.67003) and R1 ($0.6712). However, failure to move through the 50-day EMA ($0.66750) would bring S1 ($0.6635) into play. A move through the 50-day EMA would send a bullish signal.

NZD/USD Price Action

This morning, the Kiwi was flat at $0.61918. A mixed morning saw the NZD/USD fall to an early low of $0.61886 before finding support.

Technical Indicators

The NZD/USD needs to move through the $0.6203 pivot to target the First Major Resistance Level (R1) at $0.6238. A return to $0.62 would signal a bullish session. However, market risk sentiment will remain the key driver.

In the case of a breakout session, the Kiwi would likely test resistance at the Tuesday high of $0.6249 but fall short of the Second Major Resistance Level (R2) at $0.6285. The Third Major Resistance Level (R3) sits at $0.6367.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.6156 in play. However, barring a Fed-fueled sell-off, the NZD/USD pair would likely avoid sub-$0.61. The Second Major Support Level (S2) at $0.6121 should limit the downside.

The Third Major Support Level (S3) sits at $0.6039.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The NZD/USD sits below the 50-day EMA, currently at $0.62055. The 50-day pulled back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals.

A move through the 50-day ($0.62055) and 100-day ($0.62086) EMAs would support a breakout from R1 ($0.6238) to bring the 200-day EMA ($0.62507) into play. However, failure to move through the 50-day EMA ($0.62055) would leave the Major Support Levels in view. A move through the 50-day EMA would send a bullish signal.