AUD/USD and NZD/USD Fundamental Analysis: PBoC Moves in Focus

It is a quiet start to a busy week 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 consider the upbeat Michigan Consumer Sentiment and Expectation numbers from Friday. A pickup in US consumer sentiment would support increased consumption in the current labor market environment, favoring a July Fed interest rate hike.

The better-than-expected numbers coincided with hawkish Fed chatter aligned with the FOMC meeting minutes and economic projections. FOMC member Christopher Waller said,

“Inflation is just not moving, and that’s going to require, probably, some more tightening to try to get that going down.”

FOMC member Thomas Barkin also raised the prospects of a July hike, saying he supports more rate hikes considering current inflation levels.

However, expectations of further PBoC action provided early morning support. Economists forecast the PBoC to cut Loan Prime Rate on Tuesday to support the Chinese economy.

Later today, there are no US economic indicators to consider, with the US markets closed for Juneteenth Day. The lack of economic indicators will leave Fed chatter to influence ahead of Fed Chair Powell’s testimony on Tuesday.

According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 74.4%, up from 52.8% one week earlier.

AUD/USD Price Action

This morning, the AUD/USD was up 0.14% to $0.68824. A bullish start to the day saw the AUD/USD rise from an early low of $0.68712 to a high of $0.68825.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The AUD/USD sat above the 50-day EMA, currently at $0.67718. The 50-day EMA pulled further away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the Major Support Levels and the 50-day EMA ($0.67718) would support a breakout from R1 ($0.6897) to give the bulls a run at R2 ($0.6921). However, a fall through S1 ($0.6852) would bring S2 ($0.6831) into view. An AUD/USD fall through the 50-day EMA ($0.67718) would signal a near-term bullish trend reversal.

Resistance & Support Levels

The AUD/USD needs to avoid the $0.6876 pivot to target the First Major Resistance Level (R1) at $0.6897 and the Friday high of $0.68996. A return to $0.68950 would support a breakout. However, the Aussie Dollar would need risk-on sentiment to deliver a bullish session.

In case of a breakout session, the Aussie would likely test the Second Major Resistance Level (R2) at $0.6921. The Third Major Resistance Level (R3) sits at $0.6965.

A fall through the pivot would bring the First Major Support Level (S1) at $0.6852 into play. However, barring a risk-off-fueled sell-off, the AUD/USD pair should avoid sub-$0.6850 and the Second Major Support Level (S2) at $0.6831.

The Third Major Support Level (S3) sits at $0.6787.

NZD/USD Price Action

This morning, the NZD/USD was up 0.04% to $0.62338. A mixed start to the day saw the Kiwi fall to an early low of $0.62245 before rising to a high of $0.62366.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The NZD/USD sat above the 50-day EMA, currently at $0.61606. The 50-day EMA pulled away from the 200-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish signals.

A hold above the Major Support Levels and the 50-day EMA ($0.61606) would support a breakout from R1 ($0.6249) to give the bulls a run at R2 ($0.6267). However, a fall through S1 ($0.61212) would bring S2 ($0.6192) and the 50-day EMA ($0.61606) into view. A fall through the 50-day EMA would send a bearish signal.

Resistance & Support Levels

The NZD/USD has to avoid the $0.6230 pivot to target the First Major Resistance Level (R1) at $0.6249. A move through the Friday high of $0.62475 would signal a bullish session. However, market risk sentiment 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 $0.6267. The Third Major Resistance Level (R3) sits at $0.6305.

A fall through the pivot would bring the First Major Support Level (S1) at $0.6212 into play. However, barring a risk-off-fueled sell-off, the NZD/USD should steer clear of sub-$0.62 and the Second Major Support Level (S2) at $0.6192.

The Third Major Support Level (S3) sits at $0.6154.