AUD to USD Forecast: China PMIs, Aussie Retail Sales, and the RBA

Australian Retail Sales in Focus

On Tuesday (April 30), Australian retail sales figures for March will put the AUD/USD in focus.

Economists forecast retail sales to increase by 0.2% in March after advancing by 0.3% in February. Stronger-than-expected figures could fuel investor expectations of an RBA interest rate cut.

Upward trends in consumer spending could fuel demand-driven inflation. A more hawkish RBA rate path may raise borrowing costs and reduce disposable income. Downward trends in disposable income could force consumers to curb spending on non-essential items, dampening demand-driven inflation.

The RBA is likely watching Australian economic indicators closely. Recent consumer and producer price figures suggest the battle to tame inflation remains ongoing.

Beyond the Australian economic calendar, China NBS private sector PMIs and the all-important Caixin Manufacturing PMI will be in focus. The Caixin Manufacturing PMI will likely have more influence on buyer appetite for the Aussie dollar and the RBA rate path.

Economists forecast the Caixin Manufacturing PMI to fall from 51.1 to 51.0 in April.

An improving Chinese economy could drive demand. China accounts for one-third of Australian exports. Australia has a trade-to-GDP ratio above 50%, with 20% of the workforce in trade-related jobs.

Upward trends in demand would boost the Australian economy and the Aussie dollar. An improving Chinese economy would also influence the RBA rate path. The RBA staff considered the Chinese macroeconomic backdrop for the 2024 economic and inflation projections. Upward revisions to inflation and growth forecasts would support a more hawkish RBA rate path.

US Economic Calendar: Employment Costs and Consumer Confidence

Later in the session, employment cost – wages and the CB Consumer Confidence will be in focus.

Economists forecast employment cost – wages to increase by 0.9% quarter-on-quarter in Q1 2024. In Q4 2023, employment cost – wages rose by 0.9%. Higher-than-expected wages could further affect investor expectations of a September Fed rate cut.

Upward trends in wages could increase disposable income and consumer spending. A more hawkish Fed rate path could raise borrowing costs and reduce disposable income, dampening demand-driven inflation.

However, the CB Consumer Confidence Index could influence the Fed rate path more. Economists forecast the Index to decline from 104.7 to 104.0 in April. Downward trends in consumer confidence could signal a pullback in consumer spending and softer inflation.

Other US economic indicators include the Chicago PMI and house price data. However, wage data and consumer confidence figures will likely impact the AUD/USD more.

Short-Term Forecast

Near-term AUD/USD trends remain hinged on Australian retail sales figures, US labor market numbers, and the FOMC press conference. Better-than-expected Australian retail sales could raise investor bets on an RBA rate hike. Upbeat retail sales figures could tilt monetary policy divergence toward the Aussie dollar.

Conversely, better-than-expected US data could reduce the number of 2024 Fed rate cuts. However, the markets are not considering a Fed rate hike.

AUD/USD Price Action

Daily Chart

The AUD/USD remained above the 50-day EMA while hovering below the 200-day EMA, affirming bullish near-term but bearish longer-term price signals.

An Aussie dollar breakout from the 200-day EMA and the $0.65760 resistance level would give the bulls a run at the $0.66 handle.

Aussie retail sales, manufacturing PMI numbers from China, and the US economic calendar need consideration.

Conversely, an AUD/USD break below the $0.65500 handle could signal a fall to the 50-day EMA. A drop below the 50-day EMA could give the bears a run at the $0.64582 support level.

Given a 14-period Daily RSI reading of 57.46, the AUD/USD could return to the $0.66 handle before entering overbought territory.