AUD to USD Forecast: Can Falling Aussie Confidence Delay RBA Rate Hike?

Aussie Consumer Confidence and RBA Rate Hike Relief?

On Tuesday, June 25, Australian consumer sentiment figures will require consideration. Economists forecast the Westpac Consumer Confidence Index to fall by 0.1% to 82.0 in June. A larger-than-expected decline could ease fears of a 2024 RBA rate hike, potentially impacting the AUD/USD.

During the June RBA press conference, Governor Michele Bullock indicated the Board’s consideration of raising interest rates due to inflation concerns. A pullback in consumer confidence could affect consumer spending, potentially dampening demand-driven inflationary pressures and easing pressure on the RBA to hike interest rates.

In the May survey, the Westpac Consumer Sentiment Index fell by 0.3% to 82.2, with household finances and the willingness to a buy major household item contributing to the drop. Similar trends in June may provide relief from fears of a near-term RBA rate hike.

What are your thoughts on the potential impact of falling consumer confidence on the AUD/USD?

While the numbers warrant investor attention, inflation numbers on Wednesday could be a crucial data release. Economists expect the Australian CPI Monthly Indicator to increase from 3.6% to 3.8% in May, a possible green light for an RBA rate hike.

Amidst shifting sentiment toward the RBA rate path, US economic indicators may fuel investor bets on a September Fed rate cut.

US Consumer Confidence May Signal a September Fed Rate Cut

Later in the session on Tuesday, the US CB Consumer Confidence Index will draw investor attention. Economists forecast the Index to decline from 102.0 to 100.0 in June. A larger-than-expected decline may support investor expectations of a September Fed rate cut.

Furthermore, an Index drop below 100 could refuel investor jitters about a hard US landing. A sharp drop in Consumer Confidence could signal a tightening of the purse strings. A slump in consumer spending could dampen demand-driven inflation and impact the US economy. Private consumption contributed 67.6% to the US economy in March 2024.

Notably, the CB Consumer Confidence Index last sat below 100 in April. It was the first time the Index dropped below 100 since July 2022. Chief Economist at the Conference Board, Dana M. Peterson, attributed the drop to consumer concerns about inflation.

With consumer confidence in focus, investors should monitor FOMC member commentary. Comments regarding inflation, the economic outlook, and the timing of Fed interest rate cuts could move the dial. FOMC members Lisa Cook and Michelle Bowman are on the calendar to speak.

Short-Term Forecast

Near-term AUD/USD trends will hinge on the Australian and US inflation numbers. A pickup in Australian inflationary pressures and softer US inflation could tilt monetary policy divergence toward the Aussie dollar. Rising threats of an RBA rate hike and expectations of a Fed rate cut could fuel an AUD/USD move toward $0.70.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar break above the $0.67003 resistance level would support a move to the $0.67500 handle. A breakout from $0.67500 could give the bulls a run at the $0.67967 resistance level.

Australian and US consumer confidence numbers and Fed commentary require investor consideration.

Conversely, an AUD/USD drop below the $0.66500 handle could signal a fall through the 50-day EMA. A break below the 50-day EMA may bring the 200-day EMA and the $0.65760 support level into play.

With a 14-period Daily RSI reading of 53.57, the AUD may move to the $0.67500 handle before entering overbought territory.