AUD to USD Forecast: Australian Retail Sales and US Economic Sentiment

Highlights

• The AUD/USD rose by 0.10% on Monday, ending the session at $0.67193.
• On Tuesday, the markets will focus on Australian retail sales, which could influence the RBA rate path.
• Later in the session, the US economic calendar and Fed commentary need consideration.

Monday Overview of the AUD/USD

The AUD/USD rose by 0.10% on Monday. Following a 0.09% gain on Friday, the Australian dollar ended the session at $0.67193. The Australian dollar rose to a high of $0.67346 before falling to a low of $0.66775.

Australian Retail Sales in Focus

On Tuesday, Australian retail sales figures warrant investor attention. Uncertainty lingers about the RBA rate path in 2024. The recent RBA meeting minutes revealed Board members considered a December rate hike. However, Board members highlight uncertainty about household consumption while noting a softer inflation environment.

A larger-than-expected jump in retail sales could force the RBA to hold rates higher for longer. An upward trend in consumer spending could fuel demand-driven inflation. A more hawkish RBA rate path would impact borrowing costs and reduce disposable income. Downward trends in disposable income could curb consumer spending and dampen demand-driven inflation.

Economists forecast retail sales to increase by 1.2% in November versus a 0.2% decline in October. The numbers could prove significant, with the Monthly CPI Indicator out on Wednesday.

Beyond the economic indicators, stimulus chatter from Beijing needs monitoring. The pledge of a meaningful stimulus package would drive buying demand for the Aussie dollar. China accounts for one-third of Australian exports. Australia has a trade-to-GDP ratio of over 50%, with 20% of the workforce in trade-related jobs.

US Economic Calendar: Consumer Inflation Expectations

Later in the Tuesday session, US trade data for November and sentiment toward the US economy will be in focus. Barring a marked widening of the US trade deficit, the economic sentiment figures will likely garner more interest. Investors are betting on a soft landing. An uptick in sentiment toward the economy would support the bets on a soft landing.

However, these figures may not impact Q1 Fed rate cut expectations unless sentiment sharply worsens. After the hotter-than-expected US Jobs Report, the US CPI Report on Thursday will be the focal point.

Economists forecast the RCM/TIPP Economic Optimism Index to increase from 40 to 41 for January.

Beyond the numbers, investors must consider FOMC member commentary. References to the US Jobs Report, inflation, and the interest rate path need consideration.

Short-Term Forecast

Near-term trends for the AUD/USD hinge on Australian retail sales and Australian and US inflation numbers. Better-than-expected Australian retail sales and sticky inflation could tilt monetary policy divergence toward the Aussie dollar. Despite the US Jobs Report, the markets continue to bet on a Q1 Fed rate cut before the US CPI Report.

AUD/USD Price Action

Daily Chart

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

An AUD/USD break above the $0.67286 resistance level would support a move toward the $0.68096 resistance level.

The focus will be on Australian retail sales, US economic optimism data, stimulus chatter from Beijing, and Fed commentary.

However, a drop below the $0.67 handle would give the bears a run at the 50-day EMA and the $0.66162 support level.

A 14-period Daily RSI reading of 52.77 suggests an AUD/USD move to the $0.68096 resistance level before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

The AUD/USD sat below the 50-day EMA while remaining above the 200-day EMA, affirming bearish near-term but bullish longer-term price signals.

An AUD/USD breakout from the $0.67286 resistance level and the 50-day EMA would bring the $0.68096 resistance level into play.

However, a fall through the 200-day EMA would bring the $0.66162 support level into play.

The 14-period 4-Hourly RSI at 47.32 indicates an AUD/USD fall through the 200-day EMA before entering oversold territory.