AUD/USD and NZD/USD Fundamental Analysis: China Back in Focus

Highlights

• The AUD/USD and the NZD/USD were on the move this morning.
• There were no US economic indicators from overnight to influence with the US markets closed for the Fourth of July holiday.
• China services PMI numbers will influence this morning ahead of the US factory order numbers tonight.

It is a busy start to the day for the AUD/USD and the NZD/USD. The AIG Manufacturing Index for Australia drew interest this morning and followed a global trend, falling from -5.1 to -19.8.

The Index had a limited impact, with Australian retail sales figures out later this morning. However, Caixin Services PMI numbers from China will garner more interest. A marked decline in the PMI would weigh on riskier assets but raise the chances of further stimulus. Economists forecast the Services PMI to fall from 57.1 to 56.2 in June.

The European Session

Following disappointing manufacturing PMI numbers from the euro area, services PMI numbers will be in focus today. We expect downward revisions to finalized numbers to weigh on riskier assets as the markets consider the risk of a Eurozone recession.

According to prelim numbers, the Eurozone Services PMI fell from 55.1 to 52.4 in June.

The US Session

It is a relatively quiet day ahead on the US economic calendar. US factory orders will move the dial following disappointing US ISM Manufacturing PMI numbers on Monday. Economists forecast factory orders to increase by 0.8% in May.

With the US markets reopening after the Fourth of July holiday, Fed chatter would also influence.

Away from the economic calendar, China-US tensions will also play a hand ahead of US Treasury Secretary Yellen’s visit to Beijing.

AUD/USD Price Action

Daily Chart

The Daily Chart showed an AUD/USD hold above the psychological $0.6650 support level as the Aussie recovered from the RBA surprise. A four-day winning streak took the AUD/USD through the 50-day EMA ($0.66907), signaling a near-term bullish trend. However, the AUD/USD remained below the 200-day ($0.67507), signaling bearish momentum over the longer term.

Notably, the 50-day EMA narrowed to the 200-day EMA and reflected bullish momentum following four consecutive days in the green.

Looking at the 14-Daily RSI, the 50.19 reading signals a moderately bullish trend, aligned with the 50-day EMA.

4-Hourly Chart

Looking at the 4-Hourly Chart, the AUD/USD faces strong resistance at the $0.67 psychological level. After a 4-day winning streak, the AUD/USD sits above the 200-day ($0.66903) and 50-day ($0.66786) EMAs, a bullish signal. Significantly, the 50-day EMA narrowed to the 200-day EMA, signaling a run at the current resistance band of $0.6750 – $0.6770.

The AUD/USD must hold above the 50-day and 200-day EMAs to break out from $0.67 and target the lower level of the resistance band of $0.6750 – $0.6770.

Looking at the RSI, the 14-4H RSI reading of 57.79 indicates a moderately bullish stance, with buying pressure outweighing selling pressure. The RSI is aligned with the EMAs and supports a run at the resistance band of $0.6750 – $0.6770.

NZD/USD Price Action

Daily Chart

The Daily Chart showed an NZD/USD run at the psychological $0.6200 psychological level ahead of the PMI numbers from China. However, the EMAs send mixed signals. A four-day winning streak supported a breakout from the 50-day EMA ($0.61662) to target the 200-day EMA ($0.62222).

Notably, the 50-day EMA narrowed to the 200-day EMA, reflecting bullish momentum over the near term. However, the Kiwi remained below the 200-day EMA, signaling a bearish trend over the longer term.

Looking at the 14-Daily RSI, the 55.69 reading signals a moderately bullish trend, supporting a breakout from the 200-day EMA ($0.6222) to target the lower level of the $0.6234 – $0.6250 resistance band.

4-Hourly Chart

Looking at the 4-Hourly Chart, the NZD/USD faces strong resistance at the $0.62 psychological level. After the bullish Tuesday session, the NZD/USD sits above the 200-day ($0.61534) and the 50-day ($0.61451) EMAs, supporting a run at the $0.6234 – $0.6250 resistance band.

Notably, the 50-day EMA closed in on the 200-day EMA, a bullish signal.

The 14-4H RSI reading of 66.55 indicates a bullish stance, with buying pressure outweighing selling pressure. A hold above 60 would align the RSI with the EMAs and support a run at the current resistance range of $0.6234 – $0.6250.