AUD to USD Forecast: Australian Dollar Braces for Key Trade and China PMI Reports

Aussie Trade Data in Focus

Australian trade data will put the Australian economy and the AUD/USD in focus on Thursday, August 1.

Economists forecast the Australian trade surplus to narrow from A$5.773 billion in May to A$5.000 billion in June.

Investors should consider import and export trends beyond the headline figures. Australia has a trade-to-GDP ratio of over 50%. Weaker imports and exports could signal a softer demand environment, affecting the Australian economy and the Aussie dollar.

A weakening demand environment could trigger recession fears. The Australian economy expanded by 0.1% in Q1 2024. Increased exports contributed to growth. Disappointing trade data could also fuel speculation about an RBA rate cut following the softer inflation numbers for Q2 2024

China Economic Indicators

China’s Caixin Manufacturing PMI survey for July will also draw investor interest on Thursday.

Economists expect the Caixin Manufacturing PMI to decline from 51.8 in June to 51.5 in July.

Weaker-than-expected numbers could impact the Australian economy, with China accounting for one-third of Aussie exports. Reduced demand may also impact labor market conditions, with 20% of the Australian workforce in trade-related jobs.

Expert Commentary

AMP Chief Economist Shane Oliver commented on China’s NBS private sector PMIs from Wednesday, July 31, stating,

“China July NBS fell slightly, suggesting ongoing soft growth. Note that the Caixin PMIs have tended to be a bit stronger lately.”

The NBS Manufacturing PMI dropped from 49.5 in June to 49.4 in July.

China and the Australian Dollar

The Chinese economy expanded by 4.7% in Q2 2024, following growth of 5.3% in Q1 2024.

Weaker growth signaled a softer demand environment, affecting the Australian economy and the Aussie dollar.

The effect of weaker growth in China was evident on the Aussie dollar, with the AUD/USD sliding 3.27% since the GDP figures.

A lower-than-expected Caixin Manufacturing PMI could drag the Aussie dollar through Wednesday’s low of $0.64794.

US Economic Calendar

Economists forecast continuing jobless claims to increase from 1,851k in the week ending July 13 to 1,860k in the week ending July 20. A larger-than-expected increase in claims could support multiple 2024 Fed rate cuts.

A deteriorating US labor market may affect wage growth and reduce disposable income. Lower disposable income could curb consumer spending, dampening demand-driven inflation.

Fed Chair Powell on the Labor Market

On Wednesday, July 31, Fed Chair Powell discussed the US labor market during the FOMC press conference. Powell reportedly said that he did not want labor market conditions to deteriorate. The Fed Chair also noted the ongoing normalization of labor market conditions.

Powell’s comments suggested that a marked deterioration in labor market conditions could force the Fed to cut interest rates more aggressively.

Short-Term Forecast: Bullish

Near-term AUD/USD trends will depend on economic data from China, US labor market stats, and Fed chatter. Weaker-than-expected PMI data from China could impact Aussie dollar demand. However, softer US labor market conditions may raise bets on multiple 2024 Fed rate cuts, tilting monetary policy divergence toward the Aussie dollar.

Investors should remain vigilant, with stats from China and the US likely to create AUD/USD volatility. Monitor the real-time data, news updates, and expert commentary to adjust your trading strategies.

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AUD/USD Price Action

Daily Chart

The AUD/USD remained below the 50-day and the 200-day EMAs, confirming the bearish price trends.

A break above the $0.65760 resistance level would support a move toward the 200-day EMA. Furthermore, a breakout from the 200-day EMA could give the bulls a run at the 50-day EMA.

Aussie trade data, China’s Manufacturing PMI, and US labor market data require consideration on Thursday.

Conversely, an AUD/USD break below $0.65 could signal a fall toward the $0.64582 support level.

With a 14-period Daily RSI reading of 31.51, the Aussie dollar could drop to the $0.65 handle before entering oversold territory.