AUD/USD and NZD/USD Fundamental Analysis: Policy Shift Favors the AUD

It is a quiet Asian session for the AUD/USD and NZD/USD pairs. There were no economic indicators from Australia or New Zealand for investors to consider. The lack of stats will allow investors to respond to Friday’s ISM Non-Manufacturing PMI survey and the latest FOMC Member commentary.

Monetary policy divergence played a role in last week’s movements. Fed talk of slow and steady rate hikes tilted monetary policy divergence toward the RBA ahead of the Tuesday interest rate decision. The RBA has yet to deviate from its hawkish policy outlook.

In contrast, RBNZ Governor Orr warned of lifting rates too high and too quickly, leaving policy divergence in favor of the Fed. However, FOMC member talk of slow and steady and a 25-basis point rate hike for March has delivered Kiwi Dollar support.

This week could prove pivotal. A dovish RBA rate hike, a hawkish Fed Chair Powell, and economic indicators will likely deliver a choppy week. Investors need to be quick on their feet, digesting the stats and central bank monetary policy decisions, statements, and speeches.

AUD/USD Price Action

At the time of writing, the Aussie was down 0.13% to $0.67562. A choppy start to the day saw the AUD/USD fall to an early low of $0.67418 before rising to a high of $0.67693. (The Aussie closed at $0.67651 on Friday).

Technical Indicators

The AUD/USD needs to avoid the $0.6753 pivot to target the First Major Resistance Level (R1) at $0.6787. A move through the Friday high of $0.67747 would signal a bullish session. However, the Aussie Dollar would need risk-on sentiment to support another breakout session.

In case of a breakout session, the Aussie would likely test the Second Major Resistance Level (R2) at $0.6808. The Third Major Resistance Level (R3) sits at $0.6863.

A fall through the pivot would bring the First Major Support Level (S1) at $0.6732 into play. However, barring a market flight to safety, the AUD/USD pair should avoid sub-$0.67 and the Second Major Support Level (S2) at $0.6699.

The Third Major Support Level (S3) sits at $0.6644.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The AUD/USD sits below the 50-day EMA, currently at $0.67740. The 50-day EMA eased back from the 100-day EMA, with the 100-day EMA pulling back from the 200-day EMA, delivering bearish signals.

A move through the 50-day EMA ($0.67740) would support a breakout from R1 ($0.6787) to give the bulls a run at R2 ($0.6808). However, failure to move through the 50-day EMA ($0.67740) would leave the Major Support Levels in play. A move through the 50-day EMA would send a bullish signal.

NZD/USD Price Action

This morning, the Kiwi was down 0.05% to $0.62174. A bearish opening saw the NZD/USD fall to a low of $0.62139 before rising to a high of $0.62174. (The Kiwi closed at $0.62208 on Friday).

Technical Indicators

The NZD/USD needs to move through the $0.6218 pivot to target the First Major Resistance Level (R1) at $0.6244 and resistance at $0.6250. A move through the Friday high of $0.62415 would signal a bullish session. However, the Kiwi would need risk-on sentiment to support a breakout 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 $0.6316.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.6195 in play. However, barring a flight to safety, the NZD/USD pair would likely avoid sub-$0.6150. The Second Major Support Level (S2) at $0.6169 should limit the downside.

The Third Major Support Level (S3) sits at $0.6120.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The NZD/USD sits below the 50-day EMA, currently at $0.62203. The 50-day slipped back from the 100-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals.

An NZD/USD move through the 50-day EMA ($0.62203) would give support a breakout from R1 ($0.6244) and the 100-day EMA ($0.62503) to bring R2 ($0.6267) into play. A move through the 50-day EMA would send a bullish signal. However, failure to move through the 50-day EMA ($0.62203) would give the bears a run at S1 ($0.6195).