AUD/USD and NZD/USD Fundamental Analysis: Day 1 Powell Testimony

It is a quiet start to the Wednesday session for the AUD/USD and NZD/USD. There are no economic indicators from Australia or New Zealand to move the dial this morning.

The lack of economic indicators will leave investors to reflect on Tuesday’s RBA meeting minutes and Fed Chair Powell’s testimony later today.

For the Aussie, prospects of the RBA ending its monetary policy tightening cycle will remain a near-term headwind until the markets can digest relevant indicators to assess the next steps. Disappointing moves to shore up the Chinese economy will also test buyer appetite until Beijing delivers a meaningful stimulus package.

Looking forward to the US session, Fed Chair Powell will give the first day of testimony. While the FOMC press conference was only last week, investors should look out for any deviation from the FOMC press conference script.

There are no US economic indicators to influence today, leaving FOMC member chatter to move the dial.

The anticipation of Fed Chair Powell’s testimony on interest rate expectations was telling. According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 76.9% on Tuesday versus 74.4% on Friday. The chances of the Fed lifting the Fed Funds Rate to 5.75% in September increased from 8.9% to 11.5%.

AUD/USD Price Action

This morning, the AUD/USD was up 0.06% to $0.67878. A mixed start to the day saw the AUD/USD fall to an early low of $0.67797 before rising to a high of $0.67884.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent mixed signals. The AUD/USD sat above the 50-day EMA, currently at $0.67875. The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA widened from the 200-day EMA, delivering mixed signals.

A hold above the 50-day EMA ($0.67875) would support a breakout from R1 ($0.6842) to give the bulls a run at R2 ($0.6900). However, a fall through the 50-day EMA ($0.67875) would bring S1 ($0.6739) into view. An AUD/USD fall through the 50-day EMA would send a bearish signal.

Resistance & Support Levels

The AUD/USD needs to move through the $0.6797 pivot to target the First Major Resistance Level (R1) at $0.6842 and the Tuesday high of $0.68552. A return to $0.68 would support a breakout. However, the Aussie Dollar would need Fed Chair Powell to deliver a breakout.

In case of a breakout session, the Aussie would likely test resistance at $0.6850 but fall short of the Second Major Resistance Level (R2) at $0.6900. The Third Major Resistance Level (R3) sits at $0.7002.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.6739 in play. However, barring another Fed Chair Powell-fueled sell-off, the AUD/USD pair should avoid sub-$0.67 and the Second Major Support Level (S2) at $0.6695.

The Third Major Support Level (S3) sits at $0.6593.

NZD/USD Price Action

This morning, the NZD/USD was up 0.01% to $0.61675. A mixed start to the day saw the Kiwi fall to an early low of $0.61547 before steadying.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent mixed signals. The NZD/USD sat below the 50-day EMA, currently at $0.61696. The 50-day EMA narrowed to the 200-day EMA, while the 100-day EMA widened from the 200-day EMA, delivering mixed signals.

A move through the 50-day EMA ($0.61696) would support a breakout from R1 ($0.6204) to give the bulls a run at R2 ($0.6241). However, failure to move through the 50-day EMA ($0.61696) would leave S1 ($0.6132) in view. A move through the 50-day EMA would send a bullish signal.

Resistance & Support Levels

The NZD/USD has to move through the $0.6169 pivot to target the First Major Resistance Level (R1) at $0.6204 and the Tuesday high of $0.62058. A return to $0.62 would signal a bullish session. However, market risk sentiment and Fed Chair Powell would need to support a bullish session.

In the case of a breakout session, the Kiwi would likely test the Second Major Resistance Level (R2) at $0.6241. The Third Major Resistance Level (R3) sits at $0.6313.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.6132 in play. However, barring a Fed-fueled sell-off, the NZD/USD should steer clear of sub-$0.61 and the Second Major Support Level (S2) at $0.6097.

The Third Major Support Level (S3) sits at $0.6025.