AUD/USD and NZD/USD Fundamental Analysis: Aussie CPI in Focus

Highlights

• The AUD/USD is in action this morning, with CPI numbers for May likely to garner plenty of interest.
• Bets on a move beyond a July 25-basis point Fed rate hike increased overnight following better-than-expected US economic indicators,
• Fed Chair Powell could change tact later today, though there’s unlikely to be a material deviation from his testimony ahead of the Friday inflation numbers.

It is a busier start to the day for the AUD/USD. After a quiet first half of the week, inflation numbers from Australia will garner plenty of interest this morning.

From the last RBA meeting, the RBA minutes showed the RBA’s commitment to bringing inflation to target. However, the Aussie lost ground as the markets interpreted the RBA’s consideration of a pause in June as the possible end to the monetary policy tightening cycle.

An unexpected pick-up in inflationary pressure would force the RBA to deliver more and put the bulls back in the driving seat. Economists forecast the Australian annual inflation rate to soften from 6.8% to 6.1% in May.

Sub-6.0% would shut the door on further RBA moves near-term, leaving the US Core PCE Price Index numbers to decide the near-term fate of the AUD/USD pair.

There are no China or New Zealand economic indicators to provide direction to the NZD/USD pair.

The US Session

Looking at the US session, there are also no US economic indicators to move the dial. The lack of economic indicators will leave Fed Chair Powell to provide direction.

This morning, bets on a July Fed interest rate hike remained elevated despite manufacturing sector woes. According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike stood at 76.9% versus 74.4% on Monday.

Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 15.4%, up from 10.4% on Monday.

AUD/USD Price Action

This morning, the AUD/USD was down 0.06% to $0.66822. A mixed start to the day saw the AUD/USD rise to an early high of $0.66875 before falling to a low of $0.66797.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bearish signals. The AUD/USD sat below the 200-day EMA, currently at $0.67051. The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 200-day EMA ($0.67051) would support a breakout from R1 ($0.6715) to target the 100-day EMA ($0.67262) and the 50-day EMA ($0.67319). However, failure to move through the 200-day EMA ($0.67051) would leave S1 ($0.6662) in view. An AUD/USD move through the 50-day EMA would send a bullish signal.

Resistance & Support Levels

NZD/USD Price Action

This morning, the NZD/USD was down 0.05% to $0.61592. A mixed start to the day saw the NZD/USD rise to an early high of $0.61662 before falling to a low of $0.61578.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bearish signals. The NZD/USD sat below the 100-day EMA, currently at $0.61607. The 50-day EMA closed in on the 200-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals.

A move through the 100-day ($0.61607) and 200-day ($0.61636) EMAs would support a breakout from the 50-day EMA ($0.61692) to target R1 ($0.6191). However, failure to move through 50-day EMA ($0.61692) would leave S1 ($0.6143) in view. A move through the 50-day EMA would send a bullish signal.

Resistance & Support Levels