AUD to USD Forecast: Aussie Dollar Dips Amid RBA’s Stance and US Data

Highlights

• AUD/USD experienced a 0.96% decline on Tuesday, ending the session at $0.63017.
• The RBA decision to hold the cash rate amplified pressure on the Aussie Dollar.
• Upcoming US economic indicators, from ADP employment figures to ISM PMI data, to shape market sentiment.

Tuesday Overview

On Tuesday, the AUD/USD declined by 0.96%. Following a 1.04% slide on Monday, the Aussie dollar ended the day at $0.63017. The Aussie dollar rose to a high of $0.63671 before sliding to a low of $0.62854.

RBA Pause Resonates

The Aussie Dollar will likely remain under pressure following the RBA decision to leave the cash rate unchanged. A higher-for longer interest rate environment leaves the Australian economy in a precarious position. A downward trend in consumption, impacted by inflation and interest rates, would adversely impact the economy and the Aussie dollar.

Private consumption accounted for 50% of the Australian GDP in June 2023.

Choppy economic waters in China add to the mix, with the RBA flagging global economic uncertainties as a consideration.

China accounts for one-third of Australian exports. With a trade-to-GDP ratio of over 50%, weak demand from China would impact the labor market, the Aussie dollar, and the Australian economy.

US ADP Employment and ISM Non-Manufacturing PMI in Focus

Later today, US economic indicators will give investors a bird’s eye view of the US economy. After the hotter-than-expected JOLTs Job Openings report, ADP employment figures for September will set the tone. A larger-than-expected increase will likely fuel bets on another Fed rate hike.

Economists forecast the ADP to report a 160k increase in employment versus 177k in August.

Tighter labor market conditions support wage growth. Wage growth fuels consumer spending and demand-driven inflationary pressures. A more hawkish Fed interest rate trajectory would impact labor market conditions and disposable income, curbing consumption.

Later in the US session, the ISM Non-Manufacturing PMI also needs consideration. A pickup in service sector activity would enable the Fed to take a more hawkish stance on interest rates. The US services sector contributes more than 75% to GDP.

Economists forecast the ISM Non-Manufacturing PMI to decline from 54.5 to 53.6 in September.

Short-Term Forecast

The near-term trend for the AUD/USD hinges on US service sector activity and labor market conditions. An unexpected pickup in service sector activity and a larger-than-forecasted rise in hiring will likely deliver more losses for the AUD/USD pair.

AUD/USD Price Action

Daily Chart

The AUD/USD sat below the 50-day and 200-day EMAs, affirming bearish price signals.

An AUD/USD return to $0.6350 would support a move toward the $0.63854 resistance level. Market risk sentiment and US economic indicators will likely dictate buyer appetite throughout the day.

However, a pickup in service sector activity and hiring would likely see the AUD/USD break below the trend line. A drop below the trend line would give the bears a run at the $0.62749 support level.

A 14-period Daily RSI reading of 34.80 supports an AUD/USD fall below the trend line before entering oversold territory (typically below 30 on the RSI scale).

4-Hourly Chart

The AUD/USD remains below the 50-day and 200-day EMAs, reaffirming bearish price signals.

A breakout from the trend line would support a return to $0.6350 and give the bulls a look at the $0.63854 resistance level.

However, a break below the trend line would bring the $0.62749 support level into play.

The 14-period 4-Hourly RSI at 27.35 shows the AUD/USD in oversold territory.