AUD/USD and NZD/USD Fundamental Analysis: Another RBA Surprise?

Highlights

• The AUD/USD and the NZD/USD were flat this morning after making gains on Monday.
• Economic indicators from New Zealand failed to influence the Kiwi this morning, while the RBA will move the dial.
• There are no US economic indicators to consider today, with the US markets closed for the Fourth of July holiday.

It is a busy start to the day for the AUD/USD and the NZD/USD. The Kiwi was in action early, with business confidence in focus.

The NZIER Business Confidence Index rose from -66 to -63 in Q2. According to the NZIER,

• A net 59% of businesses expect a deterioration in general economic conditions in the months ahead.
• The number of firms expecting activity in their own activity to decline in Q3 increased.
• Capacity pressures eased in Q2, with firms reporting sales as their primary constraint on business. Notably, the number of firms reporting finding workers as their primary constraint continued to fall.
• Despite easing capacity pressures, cost pressures intensified in Q2 while the number of firms increasing their prices was unchanged.
• However, fewer firms expect to increase their prices in Q3, with weak demand impacting inflationary pressures,

While the weak demand outlook and the influence on inflation are bearish, the NZD/USD showed no reaction to the Q2 report. Overnight US manufacturing PMI numbers also painted a gloomy picture, with the ISM Manufacturing PMI falling from 46.9 to 46.0 in June.

While the Kiwi was non-responsive, the RBA interest rate decision and Rate Statement will move the dial later today. Economists forecast the RBA to raise interest rates by a further 25-basis point to 4.35%. The markets expect another hike despite inflation softening to 5.6% in May.

A surprise hold would sink the AUD/USD, with the Kiwi likely to feel any fallout.

The European Session

Following disappointing manufacturing PMI numbers from Germany, trade data will draw interest. A larger-than-expected narrowing in the trade surplus would be bearish, with no US economic indicators for the markets to consider today.

The US Session

It is a quiet day ahead on the US economic calendar, with the US markets closed for the Fourth of July holiday. However, investors should consider any Fed chatter.

AUD/USD Price Action

Daily Chart

The Daily Chart shows an AUD/USD hold above the psychological $0.6650 support level as the markets responded to US manufacturing PMI numbers. However, the AUD/USD remains below the 200-day ($0.67511) and 50-day ($0.66898) EMAs, signaling bearish momentum over the near and long term.

Notably, the 50-day EMA continued to pull back from the 200-day EMA and reflected bearish momentum despite three consecutive days in the green.

Looking at the 14-Daily RSI, the 47.50 reading signals a moderately bearish trend, aligned with the 50-day and 200-day EMAs.

4-Hourly Chart

Looking at the 4-Hourly Chart, the AUD/USD faces strong resistance at the $0.67 psychological level. Despite a bullish start to last week, the AUD/USD continues to sit below the 200-day ($0.66905) and 50-day ($0.66760) EMAs. Significantly, the 50-day EMA pulled back further from the 200-day EMA, signaling another test of the current support range of $0.6600 – $0.6615.

The AUD/USD would need to break out from the 50-day and 200-day EMAs to target the Monday high of $0.66918 and the resistance band of $0.6750 – $0.6770.

However, the 14-4H RSI reading of 54.19 indicates a moderately bullish stance, with buying pressure outweighing selling pressure. A fall below 50 would align the RSI with the EMAs and signal a retreat to test the current support range of $0.6600 – $0.6615.

NZD/USD Price Action

Daily Chart

The Daily Chart showed an NZD/USD breakout from the psychological $0.6100 support level as the markets responded to US manufacturing numbers. However, the NZD/USD remained below the 200-day ($0.62221) and 50-day ($0.61633) EMAs, signaling bearish momentum over the near and long term.

Notably, the 50-day EMA continued to pull back from the 200-day EMA, reflecting bearish momentum despite the bullish Monday session.

Looking at the 14-Daily RSI, the 50.33 reading signals a moderately bullish trend, supporting a breakout from the 50-day EMA ($0.61633) to target the 200-day EMA ($0.62221) and the lower level ($0.6234) of the resistance band.

4-Hourly Chart

Looking at the 4-Hourly Chart, the NZD/USD faces strong resistance at the $0.6150 psychological level. After the bullish Monday session, the NZD/USD sits at the 200-day EMA ($0.61515), signaling a near-term bullish trend formation.

However, the Kiwi must break out from the 200-day ($0.61515) to affirm a bullish trend formation and target the lower level of the $0.6234 – $0.6250 resistance range. The 50-day EMA also narrowed to the 200-day EMA, supporting a breakout from the 200-day EMA ($0.61515).

However, a fall through the 50-day EMA would give the bears a run at the $0.6100 psychological legal and the lower support band of $0.6035 – $0.6015.

The 14-4H RSI reading of 58.85 indicates a bullish stance, with buying pressure outweighing selling pressure. A hold above 55 would align the RSI with the 200-day EMA and signal a return to $0.62 to target the current resistance range of $0.6234 – $0.6250.