AUD/USD and NZD/USD Fundamental Analysis: Inflation Sinks the Kiwi

It was a busy start to the morning for the NZD/USD. Inflation figures from New Zealand drew interest. Following the RBNZ 50-basis point interest rate hike, today’s numbers could fuel speculation of further policy moves to tackle sticky inflation.

The annual inflation rate softened from 7.2% to 6.7% in the first quarter versus a forecasted 7.1%. Quarter-on-quarter, consumer prices increased by 1.2% versus 1.4% in Q4 2022. Economists forecast a 1.7% increase.

The RBNZ rate statement highlighted that the Committee expects a continued slowdown in domestic demand and a moderation in core inflation and inflation expectations.

According to the rate statement,

“The extent of this moderation will determine the direction of future monetary policy.”

Considering the 50-basis point hike, the RBNZ will likely need more data points, including unemployment and GDP numbers, before considering the next steps. However, today’s figures ease pressure on the RBNZ from delivering further policy tightening.

There are no economic indicators to digest for the AUD/USD, leaving market risk sentiment and the PBoC to influence. Later this morning, the People’s Bank of China will set the 3-year and 5-year Loan Prime Rates. Following the better-than-expected GDP numbers, the markets expect the PBoC to leave the LPRs unchanged. However, a surprise cut should support the commodity currencies.

This afternoon, US economic indicators and Fed commentary will move the dial. US jobless claims and Philly Fed Manufacturing Index figures for April will be in focus. Beyond the headline figure, we expect market sensitivity to the new orders, employment, and price sub-components.

FOMC member Christopher Waller will speak late in the US session. Last Friday, Waller fueled a dollar rally on hawkish chatter, driving the probability of a 25-basis point Fed interest rate hike to above 90%.

AUD/USD Price Action

The Aussie was down 0.04% to $0.67093. A mixed start to the day saw the AUD/USD rise to an early high of $0.67157 before falling to a low of $0.67047.

Technical Indicators

Resistance & Support Levels

The AUD/USD needs to move through the $0.6715 pivot to target the First Major Resistance Level (R1) at $0.6739 and the Wednesday high of $0.67414. A return to $0.6720 would signal a bullish session. However, the Aussie Dollar would risk-on sentiment to support a pre-US session breakout.

In the case of another breakout session, the Aussie would likely test the Second Major Resistance Level (R2) at $0.6766. The Third Major Resistance Level (R3) sits at $0.6817.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.6688 in play. However, barring a risk-off-fueled sell-off, the AUD/USD pair should avoid sub-$0.6650. The Second Major Support Level (S2) at $0.6663 should limit the downside.

The Third Major Support Level (S3) sits at $0.6612.

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The AUD/USD sits above the 100-day EMA, currently at $0.67048. The 50-day EMA closed in on the 200-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish signals.

A move through the 50-day ($0.67108) and 200-day ($0.67173) EMAs would support a breakout from R1 ($0.6739) to give the bulls a run at the R2 ($0.6766). However, a fall through the 100-day EMA ($0.67049) would bring S1 ($0.6688) into view. The morning fall through the 50-day EMA sent a bearish signal.

NZD/USD Price Action

This morning, the Kiwi was down 0.36% to $0.61775. A bearish start to the day saw the NZD/USD fall from an early high of $0.62060 to a low of $0.61722. The First Major Support Level (S1) at $0.6173 delivered early support.

Technical Indicators

Resistance & Support Levels

The NZD/USD move through the $0.6199 pivot to target the First Major Resistance Level (R1) at $0.6226. A move through the Tuesday high of $0.62256 would signal a bullish session. However, market risk sentiment must support a breakout.

In the case of a breakout session, the Kiwi would likely test the Second Major Resistance Level (R2) at $0.6253. The Third Major Resistance Level (R3) sits at $0.6306.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.6173 in play. However, barring a data-off-fueled sell-off, the NZD/USD pair would likely avoid sub-$0.6150 and the Second Major Support Level (S2) at $0.6146.

The Third Major Support Level (S3) sits at $0.6093.

Looking at the EMAs and the 4-hourly chart, the EMAs send bearish signals. The NZD/USD sits below the 50-day EMA, currently at $0.62198. The 50-day EMA fell back from the 100-day and 200-day EMAs, with the 100-day EMA pulling back from the 200-day EMA, delivering bearish signals.

A move through the 50-day EMA ($0.62198) would support a breakout from R1 ($0.6226) and the 100-day ($0.62282) and 200-day ($0.62357) EMAs to give the bulls a run at R2 ($0.6253). However, failure to move through the 50-day EMA ($0.62198) would leave S1 ($0.6173) in play. A move through the 50-day EMA would send a bullish signal.