AUD to USD Forecast: Australian Economic Indicators and China in Focus

Highlights

• The AUD/USD rallied 1.01% on Friday, ending the session at $0.66708.
• Fed Chair Powell fueled an AUD/USD move toward the $0.67 handle.
• Australian economic indicators and US factory orders will be focal points on Monday.

Friday Overview of the AUD/USD

The AUD/USD rallied 1.01% on Friday. After a 0.18% loss on Thursday, the Aussie dollar ended the day at $0.66708. The Aussie dollar fell to a low of $0.65994 before rising to a high of $0.66757.

Australian Economic Calendar in Focus

Australian home loans and company gross profits will garner investor interest on Monday.

An unexpected fall in home loans and a larger-than-expected fall in company gross profits would affect the buyer demand for the AUD/USD. Weak loan demand could signal a deterioration in consumer sentiment. Waning consumer sentiment would impact consumer spending and dampen demand-driven inflation.

Softer demand-driven inflationary pressures would ease the need for a hawkish RBA rate path. Australian private consumption contributes over 50% to the economy. Weak consumption could drive bets on an economic recession.

Economists forecast home loans to increase by 0.8% in October after falling 0.1% in September.

Weaker-than-expected gross company profits could also affect the outlook for consumer spending. Falling profits could force firms to cut costs, including staffing levels. A deteriorating labor market would impact consumer confidence and wage growth.

Beyond the numbers, investors must monitor stimulus chatter from Beijing. A substantial stimulus package could sustain the Aussie dollar move toward $0.67.

US Factory Orders in Focus

On Monday, US factory orders will draw investor interest. A larger-than-expected slide in orders would signal a weakening demand outlook, favoring a less hawkish Fed rate path. The US manufacturing sector accounts for less than 30% of the economy. However, cracks in the US economy would support bets on a Q1 2024 Fed rate cut.

According to the CME FedWatch Tool, the probability of a 25-basis point March Fed rate stood at 51.5% on Friday vs. 21.0% on Friday, November 24. The jump in the chance of a Q1 2024 rate cut reflected the market reaction to Fed Chair Powell’s speech on Friday.

Short-Term Forecast

Near-term AUD/USD trends hinge on the RBA (Tues), US services sector stats (Tues), and the US Jobs Report (Fri). A hawkish RBA hold, softer service sector activity, and weaker wage growth would deliver further AUD/USD gains on monetary policy divergence.

AUD/USD Price Action

Daily Chart

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

An AUD/USD return to $0.67 would support a move to the $0.67286 resistance level.

Australian and US economic indicators are focal points for the Monday session.

However, a break below the $0.66162 support level would bring the trend line and the 200-day EMA into play. Buying pressure could intensify at $0.65760. The 200-day EMA is confluent with the trend line.

A 14-period Daily RSI reading of 68.68 suggests an AUD/USD move to $0.67 before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

The AUD/USD sat above the 50-day and 200-day EMAs, reaffirming bullish price signals.

An AUD/USD return to $0.67 would give the bulls a run at the $0.67286 resistance level.

However, a break below the $0.66162 support level would bring the 50-day EMA and the trend line into play.

The 14-period 4-Hourly RSI at 63.92 suggests an AUD/USD move to the $0.67286 resistance level before entering overbought territory.