Fx Pairs Analysis

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During the Asian session, the NZDUSD pair is consolidating near 0.6470 and local lows of May 27. Yesterday, the instrument attempted corrective growth but failed to consolidate on new highs and returned to the red zone closer to the close of the daily session.

On Wednesday, the asset was supported by positive data from China and Australia, where the slowdown in economic growth was slightly milder than analysts predicted: an increase in the Caixin Manufacturing PMI for May was recorded from 46 to 48.1 points, while the forecast for growth was only up to 47 points. Manufacturing activity will likely grow at a more robust pace going forward as factories in Shanghai resume operations from June 1 after a long lockdown.

In turn, pressure on the instrument yesterday was exerted by cautiously optimistic data from the US Manufacturing PMI, and the monthly economic review from the US Federal Reserve published closer to the close of the session. The regulator noted a moderate economic recovery in almost all twelve districts. However, some of them have slowed growth as economic conditions continue to deteriorate. Retail is facing rising food and energy prices, and housing markets react to rising interest rates.

New Zealand Prime Minister Jacinda Ardern intends to discuss with US President Joe Biden the issue of response to the conclusion of agreements in the field of trade, politics, and security by the Chinese authorities with representatives of the island states of the Indo-Pacific region. Some experts attribute the intensification of China's activities in the region to the possible consequences of the military conflict in Ukraine. Still, many believe that in this way, the PRC authorities are trying to dominate the region and then use these territories to deploy military bases, which creates significant concern for the New Zealand authorities and Australia.

On the daily chart, Bollinger bands are growing moderately: the price range is narrowing rather quickly, reacting to the appearance of a predominantly "bearish" dynamics in the market. The MACD indicator is falling, forming a new sell signal (the histogram is trying to consolidate below the signal line). Stochastic shows a much more confident decline, but at the moment, it is rapidly approaching its lows, indicating the risks of the New Zealand dollar being oversold in the nearest time intervals.

Resistance levels: 0.65, 0.6567, 0.66, 0.665 | Support levels: 0.645, 0.64, 0.63, 0.625

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During the Asian session, the Australian dollar is slightly declining, correcting after a sharp rise the day before, which led to a renewal of local highs from April 22. The quotes of AUDUSD were supported by not the most confident macroeconomic statistics from the US, which were released the day before. In particular, a report from Automatic Data Processing (ADP) reflected weaker growth in private non-farm payrolls in May, rising by just 128K from a 202K increase a month earlier, with experts forecasting 300K, slightly lowering investor expectations for the May US labor market report, which will be published today.

This week, The Australian published information about the readiness of the Chinese authorities to postpone the conclusion of security pacts with a number of island states in the Indo-Pacific region. The document concerns the laying of submarine cables, the construction of berths, the development of shipbuilding, as well as other areas of cooperation, including China's investment in the development of these regions. Experts believe that the country, to which the island states will join, will eventually gain control over the entire Pacific Ocean, and the Chinese authorities probably will not give up trying to conclude these agreements.

Bollinger Bands on the daily chart show a steady increase. The price range is expanding from above but it fails to conform to the surge of "bullish" activity at the moment. MACD grows, preserving a stable buy signal (located above the signal line). Stochastic, having approached its highs is reversing into a horizontal plane, indicating the overbought instrument in the ultra-short term.

Resistance levels: 0.7300, 0.7341, 0.7400, 0.7450 | Support levels: 0.7250, 0.7202, 0.7150, 0.7100

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Australian dollar remains under pressure
During the Asian session, the AUDUSD pair shows ambiguous trading dynamics, consolidating near the level of 0.7200.

On Tuesday, investors are focused on the decision of the Reserve Bank of Australia (RBA) on interest rates, which added activity to a fairly calm market. The regulator decided to increase the value by 50 basis points, contrary to the expected growth of only 25, from 0.35% to 0.85%. The accompanying statement noted that inflation in the country increased significantly, although it remained on average lower than in other advanced economies. Officials predictably identified the consequences of the COVID-19 pandemic and the development of the military conflict in Ukraine as external factors. Negative dynamics within the country were also noted, particularly a reduction in production capacity and a poor labor market. RBA forecasts suggest that inflationary risks will continue to grow but will be adjusted to 2–3% target levels next year.

Macroeconomic statistics from Australia exert little pressure on the positions of the instrument. Thus, the service sector's activity index from AiG in May fell sharply from 57.8 to 49.2 points, which was worse than the average analysts' forecasts.

Meanwhile, investors are watching the rhetoric of the Chinese authorities regarding the development of relations with Australia. Thus, Chinese Foreign Minister Wang Yi, as part of a tour of eight countries in the Asia-Pacific region, announced the need to restart them. It is worth noting that the activity of Chinese representatives in the region is of concern to official Canberra since the Chinese authorities have already managed to sign more than fifty agreements with island states on trade and security, while another ten countries are still considering such a possibility. Experts believe that the state to which the island regions will join will eventually gain control over the entire Pacific Ocean, and the Chinese authorities will probably not give up trying to conclude these agreements.

On the daily chart, Bollinger Bands are actively growing: the price range is narrowing, indicating the emergence of multidirectional trading dynamics in the short term. The MACD indicator is trying to reverse into a downward plane, forming a new sell signal (the histogram is trying to settle below the signal line). Stochastic remains confidently down but is rapidly approaching its lows, indicating that the Australian dollar may become oversold in the ultra-short term.

Resistance levels: 0.7202, 0.7250, 0.7300, 0.7350 | Support levels: 0.7150, 0.7100, 0.7050, 0.7000.

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The market is waiting for the US inflation data​

USDCAD is correcting upwards, trading around 1.269. The Canadian currency has been actively increasing in value against the US dollar for almost the entire week; however, in the end, it lost all the gained positions, which was caused by two main factors.

First of all, the Bank of Canada released a report on financial stability, which reflected the main points of vulnerability of the national economic system. The regulator noted the negative dynamics of housing prices, which have grown by more than 50% since the beginning of the coronavirus pandemic and until now. In addition, the country has recorded an increase in the number of heavily indebted households, which in the near future may face an even greater burden due to rising interest rates on loans.

The second reason for the growth of USDCAD is the strengthening of the US dollar, which reached 103 in the USD Index. In turn, market participants almost did not react to another increase in the number of Initial Jobless Claims, which amounted to 229K against 202K a week earlier. Key expectations of investors are related to today's data on consumer inflation in the US, which may increase by 0.7% over the month and remain at 8.3% in annual terms.

On the global chart of the asset, the price continues to trade within a wide ascending channel with dynamic boundaries of 1.2450–1.3100, having reached the support line the day before. The fluctuation range of the Alligator indicator EMAs began to actively narrow, and the histogram of the AO oscillator is forming new ascending bars, actively rising in the sell zone.

Support levels: 1.2630, 1.2463 | Resistance levels: 1.2730, 1.2890​

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The New Zealand currency is declining against the US dollar. However, there is an obvious trend towards its strengthening relative to other currencies due to the publication of positive national macroeconomic statistics: after the removal of the main coronavirus restrictions, the flow of people crossing the border increased significantly, reaching 266.7K people in April, which significantly exceeds the figures of previous months and 15.9K in May 2020. Also, data on spending on credit cards were published earlier, which reflected an increase in the purchasing activity of the population. Thus, the May figure was 123M New Zealand dollars, which is 1.4% higher than the April data.

The US currency strengthened significantly, surpassing 104.000 in the USD Index. The upward trend was catalyzed by the publication of data on consumer prices: inflation in the United States increased to 8.6% compared to May 2021, which exceeded the analysts' forecast, which assumed that the indicator would remain at 8.3%. The US Federal Reserve did not expect the index to rise in May, but it amounted to 1.0%, significantly exceeding the consensus forecast of 0.7%, leading to an annual value increase. Such statistics mean that the US regulator will have to continue actively tightening monetary policy.

The trading instrument is moving within the global downtrend, approaching the year's low around 0.6220. Technical indicators reversed and gave a sell signal: fast EMAs on the Alligator indicator crossed the signal line downwards, and the AO oscillator histogram formed new downward bars below the zero line.

Resistance levels: 0.6410, 0.6566 | Support levels: 0.6220, 0.6070​

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Yesterday, Statistics Canada (StatCan) published data on the state of the Construction Sector, investment in which has been increasing for the seventh month in a row, adding 2.7% to 20.0 billion Canadian dollars in April. Financing for the construction of houses increased by 3.2%, and for the construction of non-residential buildings it increased by 1.4%. These data point to the stability of the real estate market in Canada, even in conditions of high inflation. Today, traders will be watching the data on Manufacturing Sales, which is expected to slow down to 1.6% from 2.5% a month earlier.

The US dollar, in turn, reached an all-time high of the year on May 12 at 104.900 in the USD Index on the back of a wave of sell-offs in risky assets, remaining stable in anticipation of today's publication of Producer Price Index data. According to forecasts, the May Producer Price Index may rise by 0.8%, which will provide an uptrend in the annual rate by 10.9%, and this, in turn, will signal a strengthening of the national currency.

On the global chart of the asset, the price is trading within the wide upward channel with dynamic borders of 1.2450–1.3100, actively approaching the resistance line. The fluctuation range of the Alligator indicator EMAs is about to issue a buy signal, and the histogram of the AO oscillator is forming new ascending bars, actively rising in the sell zone.

Support levels: 1.2763, 1.2525 | Resistance levels: 1.2937, 1.3077​

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AUD USD, the uptrend is possible​

AUD USD continues its uncertain corrective dynamics, trading at 0.6997 after the Australian Bureau of Statistics (ABS) published labor market data in May. According to the report, the Unemployment Rate remained at 3.9% for the third consecutive month, signaling a slowdown in labor force growth. Despite this, Employment Change in the country increased by 60.6K to 13.510M people, and the Participation Rate grew to 66.7%, although the Unemployment Change increased by 7.8K people, amounting to 548.1K. Thus, the national labor market is actively recovering, which provides support to the national economy.

In turn, two key blocks of statistics were published yesterday in the US, which influenced the quotes. Initial Jobless Claims amounted to 229K, which exceeded the 215K projected by analysts, and Continuing Jobless Claims increased to 1.312M from 1.309M. In addition, a report on the state of the housing market was released, according to which in May the Building Permits Change fell to 1.695M from 1.823M a month earlier, which led to a decrease in the Housing Starts to 1.549M from 1.810M a month earlier.

On the global chart of the asset, the price is trading within the Expanding Formation pattern, making a second attempt to implement the 5th wave. Technical indicators have already begun to weaken the sell signal: the fast EMAs of the Alligator indicator are approaching the signal line and the histogram of the AO oscillator has almost reached the transition level.

Support levels: 0.6966, 0.6850 | Resistance levels: 0.7072, 0.7265​

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AUD USD - Technical analysis​

H4
On the four-hour chart above the level of 0.6901 there is a "bullish" Engulfing Pattern, which signals a price reversal at the bottom, as well as a Bullish Belt Hold pattern, explaining that the buyers attempted to counterattack, but the "bears" seized the initiative, which became a driver for the decline in instrument quotes. At the moment, the most likely scenario is with an uptrend from the support level of 0.6841 to the resistance area of 0.7048, overcoming which will allow the "bulls" to move higher into the range of 0.7270–0.7581. An alternative scenario may be relevant if the buyers fail to hold the support level of 0.6841: then the price may fall down to the level of 0.6539.

D1
On the daily chart, there is a formation of a Double Bottom price pattern. An additional signal for a reversal may be the formation of a large Bullish Candle above the support level of 0.6841, which is also a Bullish Belt Hold pattern. Next is the formation of another Bullish Belt Hold pattern, which is similar to the Piercing Pattern of the reversal at the bottom. In the current situation, it is possible to retest the level of 0.6841, from where the instrument may bounce to the resistance level of 0.7048, with its subsequent overcoming and the price recovering to the zone of 0.7270–0.7581.

Support levels: 0.6841, 0.6693, 0.6539 | Resistance levels: 0.7048, 0.7270, 0.7581

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