AUD to USD Forecast: Australian Dollar Eyes China Trade Data Impact

Aussie Economic Calendar

On Wednesday, August 7, the Ai Group Australian Industry Index put the focus on the AUD/USD, rising from -25.6 in June to -20.7 in July.

The better-than-expected numbers could signal an improving demand environment. The Index gauges views from Australian non-service-based companies across sectors including construction, manufacturing, and mining.

Key subcomponents of the Index to consider are input prices and wages (price) indicators, leading inflation indicators. Upward price trends suggest a higher inflation environment and a more hawkish RBA rate path.

However, trade data from China will be crucial for the Aussie dollar.

China Trade Terms and the Aussie Economy

Later in the morning session, trade data from China will impact Aussie dollar demand and market risk sentiment.

Economists forecast a 9.6% year-on-year increase in exports for July, up from 8.6% in June.

An increase in exports could boost the Australian economy and the Aussie dollar, as China accounts for one-third of Australian exports. Australia’s trade-to-GDP ratio is above 50%, with 20% of its workforce in trade-related jobs. Improved labor market conditions could support wage growth and disposable income, fueling consumer spending and demand-driven inflation.

Increased demand from China could also influence the RBA’s rate path. RBA staff may adjust their inflation and growth forecasts if China’s macroeconomic environment improves.

Investors should also consider import trends. An unexpected decline in imports may signal a weaker demand outlook. Economists forecast imports to increase by 3.3% year-on-year in July after falling by 2.3% in June.

Better-than-expected trade data may support an AUD/USD move toward $0.67.

Expert Comments on the RBA and the Aussie Economy

AMP Head of Investment Strategy and Chief Economist Shane Oliver commented on the RBA’s revised forecasts, stating,

“RBA revised up its growth & unemployment forecasts slightly. Its changes to headline inflation forecasts reflect cost of living measures pulling down then pushing up inflation. So best to focus on the trimmed mean which now shows a slightly slower return to midpoint of the target.”

US Economic Calendar: FOMC Member Commentary

Later in the session on Wednesday, investors should monitor FOMC Member commentary.

Views on the economic outlook, inflation, and the Fed rate path require consideration following the recent labor market and services PMI data.

Wall Street Journal Chief Economics Correspondent Nick Timiraos shared views from Goldman Sachs, saying,

“Goldman Sachs says there are good reasons to think the rising unemployment rate in the weak-across-the-board July payroll report is less fearsome than normal… But raises its recession-probability-tracking odds to 25% from 15%. First increase since March ’23 bank stress.”

Timiraos added,

“Goldman now expects rate cuts at each of the Fed meeting this year, adding a cut to November.”

In a data-light week on the US economic calendar, Thursday’s jobless claims data could be pivotal.

Short-Term Forecast: Bearish

Near-term AUD/USD trends hinge on trade and inflation numbers from China, Fed commentary, and US jobless claims data. Upbeat numbers from China could support a higher-for-longer RBA rate path. Conversely, weaker US labor market data could signal a more dovish Fed rate path and an Aussie dollar move toward $0.67.

Investors should remain alert, with economic data from China and market risk sentiment influencing AUD/USD volatility. Monitor the real-time data, news updates, and expert commentary to adjust your trading strategies.

Stay updated with our latest views and analysis to manage exposures to the forex markets.

AUD/USD Price Action

Daily Chart

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

A return to $0.65500 would support a move to the $0.65760 resistance level. A breakout from the $0.65760 resistance level could give the bulls a run at the 200-day and 50-day EMAs.

Trade data from China, market risk sentiment, and Fed commentary require consideration on Wednesday.

Conversely, an AUD/USD break below the $0.64582 support level could give the bears a run at the bottom trend line.

With a 14-period Daily RSI reading of 32.89, the Aussie dollar could drop to the $0.64582 support level before entering oversold territory.