AUD/USD and NZD/USD Fundamental Analysis: Stimulus Needed for More

Highlights

• The AUD/USD and the NZD/USD held steady in the early hours of the Asian session.
• This morning, there are no economic indicators from Australia or New Zealand to move the dial.
• However, US consumer sentiment figures will draw interest later today.

It is a quiet start to the day for the AUD/USD and NZD/USD on Friday. There are no economic indicators from Australia or New Zealand for investors to consider this morning.

The lack of economic indicators will leave investors to respond to the overnight US economic indicators. Producer Price Index numbers from the US supported the consensus that the Fed will end its monetary policy tightening cycle after a final rate hike this month.

However, while investors will continue to respond to the overnight US economic indicators, the light economic calendar could put Beijing in the spotlight. Beijing may need to deliver on stimulus bets to support the uptrend in the Aussie and the Kiwi.

The European Session

It is a relatively busy day ahead on the European economic calendar. German wholesale inflation and Eurozone trade data will provide direction. After the disappointing trade data from China, a more marked decline in German wholesale prices and a widening in the Eurozone trade deficit would weigh on riskier assets.

However, investors should also track ECB chatter. ECB Executive Board Member Luis de Guindos is on the calendar to speak today. Post-summer forward guidance will draw interest.

The US Session

It is a relatively busy day on the US economic calendar. US import and export price numbers for June will draw interest ahead of prelim Michigan Consumer Sentiment figures.

With inflation the hot topic of this week, we expect the import and export price index figures to garner more interest than usual. However, the Michigan Consumer Sentiment Report will have more impact. Economists forecast the Michigan Consumer Sentiment Index to increase from 64.4 to 65.5 in July.

Beyond the economic data, FOMC member commentary would also move the dial. Investors will need FOMC members to affirm the market consensus on Fed monetary policy to support the pairings at the current levels.

AUD/USD Price Action

Daily Chart

The Daily Chart showed the AUD/USD sitting below the psychological $0.69 resistance level but above the lower level of the $0.6878 – $0.6905 resistance band.

Notably, the AUD/USD remained above the 50-day ($0.67056) and 200-day ($0.67504) EMAs, signaling bullish momentum over the near and longer-term time horizons.

The 50-day EMA closed in on the 200-day EMA and reflected bullish momentum after the bullish Wednesday and Thursday sessions.

Looking at the 14-Daily RSI, the 66.69 reading signals a bullish trend and suggests a move through $0.69 to target $0.6950. However, a fall through the lower level of the $0.6878 – $0.6905 resistance band could bring the upper level of the $0.6755 – $0.6729 support band and the 200-day EMA ($0.67504) into play.

4-Hourly Chart

Looking at the 4-Hourly Chart, the AUD/USD faces resistance at the $0.69 psychological level. After the Thursday session, the AUD/USD sits above the lower level of the $0.6878 – $0.6905 resistance band. The AUD/USD also remains above the 50-day ($0.67247) and 200-day ($0.66972) EMAs, sending bullish signals.

Significantly, the 50-day EMA pulled away from the 200-day EMA after the Thursday bullish cross, supporting a run at $0.6950. However, the AUD/USD must avoid the lower level of the $0.6878 – $0.6905 resistance band to target $0.6950.

Looking at the RSI indicator, the 14-4H RSI reading of 77.62 indicates overbought territory, with buying pressure outweighing selling pressure. The RSI is aligned with EMAs and supports a run at $0.6950.

NZD/USD Price Action

Daily Chart

The Daily Chart showed the NZD/USD sitting below the upper level of the $0.6397 – $0.6380 resistance band. Significantly, the EMAs sent bullish signals. The Kiwi dollar sat above the 50-day ($0.61911) and 200-day ($0.62250), sending bullish near and longer-term signals.

Notably, the 50-day EMA closed in on the 200-day EMA, supporting the currently bullish near-term trend.

Looking at the 14-Daily RSI, the 70.50 reading signals the NZD/USD in overbought territory, suggesting strong resistance at $0.64. A breakout from the upper level of the $0.6380 – $0.6397 resistance band would give the bulls a run at $0.6450.

4-Hourly Chart

Looking at the 4-Hourly Chart, the NZD/USD faces strong resistance at the $0.64 psychological level. After the bullish Wednesday and Thursday sessions, the NZD/USD sits above the 50-day ($0.62326) and 200-day ($0.61800) EMAs, supporting a breakout from the upper level of the $0.6380 – $0.6397 resistance band.

Notably, the 50-day EMA pulled further away from the 200-day EMA, a bullish signal.

The 14-4H RSI reading of 78.36 indicates the Kiwi dollar is sitting in overbought territory, with buying pressure outweighing selling pressure. Significantly, the 14-4H RSI aligns with the EMAs and signals a breakout from the upper level of the $0.6380 – $0.6397 resistance band.