AUD/USD and NZD/USD Fundamental Analysis: China Inflation Risk

It is another busy morning for the AUD/USD. Consumer and business sentiment figures will draw interest later this morning. The threat of further RBA interest rate hikes weighed on consumer and business sentiment in recent months, making the timing of the survey relevant.

Last week, the RBA stood pat on interest rates, with news of banks lowering borrowing rates a favorable outcome for consumers and businesses.

Economists forecast the Westpac Consumer Confidence Index to rise by 1.5% to 79.7 in April, with the NAB Business Sentiment Index to climb from -4 to -2 in March.

While the stats will influence the Aussie, inflation figures from China will impact the AUD/USD and the NZD/USD. A more marked acceleration in the annual inflation rate could spook investors following OPEC’s surprise decision to cut supply.

However, there are no US economic indicators to influence market risk sentiment ahead of tomorrow’s all-important US CPI Report for March. The lack of stats would leave Fed chatter to dictate the afternoon session.

On Friday, the US Job Report fueled bets of a 25-basis point interest rate hike in May. A hotter-than-expected CPI report would cement a rate hike and possibly reignite fears of a US recession and global credit crunch.

On the geopolitical front, US-China tensions need monitoring.

AUD/USD Price Action

The Aussie was up 0.06% to $0.66450. A mixed start to the day saw the AUD/USD fall to an early low of $0.66338 before rising to a high of $0.66471.

Technical Indicators

The AUD/USD needs to move through the $0.6647 pivot to target the First Major Resistance Level (R1) at $0.6674 and the Monday high of $0.66802. A return to $0.6650 would signal a bullish session. However, the Aussie Dollar would need Aussie stats and a ‘risk on’ US session to support a breakout day.

In case of a breakout session, the Aussie would likely test the Second Major Resistance Level (R2) at $0.6708. The Third Major Resistance Level (R3) sits at $0.6769.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.6613 in play. However, barring another risk-off-fueled sell-off, the AUD/USD pair should avoid sub-$0.66 and the Second Major Support Level (S2) at $0.6586.

The Third Major Support Level (S3) sits at $0.6525.

Looking at the EMAs and the 4-hourly chart, the EMAs send bearish signals. The AUD/USD sits below the 50-day EMA, currently at $0.66854. The 50-day EMA pulled back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals.

A move through R1 ($0.6674) and the 50-day ($0.66854) and 100-day ($0.66920) EMAs would give the bulls a run at R2 ($0.6708). However, failure to move through R1 ($0.6674) and the 50-day EMA ($0.66854) would leave S1 ($0.6613) in play. A move through the 50-day EMA would send a bullish signal.

NZD/USD Price Action

This morning, the Kiwi was up 0.14% to $0.62221. A mixed start to the day saw the NZD/USD fall to an early low of $0.62099 before rising to a high of $0.62275.

Technical Indicators

The NZD/USD needs to avoid the $0.6221 pivot to target the First Major Resistance Level (R1) at $0.6249. A return to $0.6240 would signal a bullish session. However, China inflation and market risk sentiment must support a breakout.

In the case of a breakout session, the Kiwi would likely test the Monday high of $0.62563 but fall short of the Second Major Resistance Level (R2) at $0.6284. The Third Major Resistance Level (R3) sits at $0.6347.

A fall through the pivot would bring the First Major Support Level (S1) at $0.6186 into play. However, barring another risk-off-fueled sell-off, the NZD/USD pair would likely avoid sub-$0.6175 and the Second Major Support Level (S2) at $0.6158.

The Third Major Support Level (S3) sits at $0.6096.

Looking at the EMAs and the 4-hourly chart, the EMAs send bearish signals. The NZD/USD sits below the 100-day ($0.62460) and 200-day ($0.62460) EMAs. The 50-day narrowed to the 200-day EMA, with the 100-day EMA converged on the 200-day EMA, delivering bearish signals.

A move through the 100-day ($0.62460) and 200-day ($0.62460) EMAs would support a breakout from R1 ($0.6249) and the 50-day EMA ($0.62539) to give the bulls a run at R2 ($0.6284). However, failure to move through the 100-day ($0.62460) and 200-day ($0.62460) EMAs would leave S1 ($0.6186) in play. A move through the 50-day EMA would send a bullish signal.