AUD to USD Forecast: Australian Dollar Rises, but PMIs Could Change the Tide

Highlights

• On Tuesday, AUD/USD rallied to a peak of $0.64578 before settling at $0.64229, reflecting the day’s volatile nature.
• Aussie manufacturing and services PMIs in focus.
• US service sector PMI, representing over 70% of the economy, will influence Fed monetary policy bets.

Tuesday Overview

On Tuesday, the AUD/USD rose by 0.14% to end the day at $0.64229. The appetite for riskier assets provided support. A choppy start saw the AUD/USD fall to an early low of $0.64035. But the AUD/USD rallied to a high of $0.64578 before a late reversal.

Private Sector PMIs to Dictate Direction

Australian services and manufacturing PMIs will influence. A weak global demand environment has affected the manufacturing sector. However, the services sector has also struggled. A deeper contraction across the private sector would keep the RBA door closed on more rate hikes.

Economists forecast the manufacturing PMI to increase from 49.6 to 50.1. However, economists expect the services PMI to hold steady at 47.9. The services PMI will have more impact, with services making over 60% of the Australian economy.

Weaker PMI numbers would weigh on the AUD/USD before the US PMI figures later. Monetary policy divergence favors the dollar after the weaker Australian employment numbers. The PMI figures from Australia will unlikely force the RBA to hike interest rates. But the PMIs will show if the RBA can avoid a recession.

US Service Sector in the Spotlight

US prelim private sector PMI for August will be in focus today. We expect the services PMI to have more impact on the Fed and interest rates. The services sector makes up more than 70% of the US economy. A services PMI falling below 50 could end the chance of a Fed rate hike before December.

Economists forecast the services PMI to fall from 52.3 to 52.2 in August. Investors must also look at employment, output prices, and new orders. Falling new orders, output prices, and staff levels are bearish.

Investors should also follow FOMC member speeches before the Jackson Hole Symposium on Thursday.

AUD/USD Price Action

Daily Chart

The Daily Chart showed the AUD/USD hold at the lower level of the $0.6430 – $0.6450 resistance band. Significantly, the Australian dollar also sat below the 50-day and 200-day EMAs, sending bearish near and longer-term price signals.

Looking at the 14-Daily RSI, 31.75 reflects bearish sentiment. The RSI aligns with the EMAs, signaling a fall to sub-$0.64 to bring the $0.6340 – $0.6320 support band into play. However, avoiding sub-$0.64 would give the bulls a run at the upper level of the $0.6430 – $0.6450 resistance band.

4-Hourly Chart

Looking at the 4-Hourly Chart, the AUD/USD sits at the lower level of the $0.6430 – $0.6450 resistance band. The extended bearish trend leaves the AUD/USD below the 50-day and 200-day EMAs, affirming bearish near and longer-term price signals.

Looking at the 14-4-Houly RSI, 49.28 also reflects a bearish sentiment, with selling pressure overweighing buying pressure. The RSI aligns with the EMAs supporting a return to sub-$0.64 to bring the $0.6340 – $0.6320 support band into play. However, a move through the lower level of the $0.6430 – $0.6450 resistance band would give the bulls a run at the 50-day EMA.

Price action today will hinge on the prelim private sector PMIs for August and speculation on Fed interest rates.