AUD to USD Forecast: China Inflation, NPC, and US Data Set Tone

Friday Overview of the AUD/USD

The AUD/USD rose by 0.08%. Following a 0.85% gain on Thursday, the Australian dollar ended the session at $0.66262. The Australian dollar fell to a low of $0.66131 before rising to a high of $0.66676.

China Inflation, Vehicle Sales, and the National People’s Congress

On Monday, inflation numbers from China need consideration. Hotter-than-expected consumer price figures highlighted a pickup in consumption midway through the second quarter. Consumer prices increased by 0.7% year-on-year in February after falling by 0.8% in January.

However, producer prices declined by 2.7% year-on-year after falling by 2.5% in January. Producers reduce prices in a weaker demand environment. Producer prices are also a leading indicator of consumer price inflation. The February figures suggest the rise in consumer prices was temporary. The Lunar New Year possibly affected consumer price inflation trends in February.

Later today, investors must also consider vehicle sales data from China. Economists expect vehicle sales to increase 41.0% year-on-year in February versus 47.9% in January. Vehicle sales will give investors a view of consumer sentiment and demand.

The Chinese economy is significant for the Australian economy and the Aussie dollar. China accounts for one-third of Australian exports, and 20% of the Australian workforce is in trade-related jobs. An improving macroeconomic environment in China would support the Australian economy and the Aussie dollar.

Beyond the numbers, the National People’s Congress (NPC) ends on Monday. A fiscal stimulus package could reboot the Chinese economy and boost demand for the Aussie dollar and riskier assets.

There are no economic stats from Australia to consider on Monday.

US Economic Calendar: Consumer Inflation Expectations

On Monday, US consumer inflation expectations will garner investor interest. Inflation is the hot topic of the week. The US CPI Report (Tues), Retail Sales (Thurs), and the Michigan Consumer Sentiment Report (Fri) are in Focus.

Economists forecast consumer inflation expectations to remain at 3.0% in February.

Softer-than-expected consumer inflation expectations could improve consumer confidence. An improving consumer confidence environment could fuel consumer spending and demand-driven inflation.

However, considering the weaker-than-expected US labor market data, softer inflation may not be enough to drive consumption. Consumers curb spending on non-essential items in a deteriorating labor market environment. Weaker consumer spending trends would support an H1 2024 Fed rate cut.

Short-Term Forecast

Near-term AUD/USD trends will hinge on US inflation figures and economic data from China. Softer US inflation numbers and upbeat economic indicators from China could drive buyer demand for the AUD/USD. A fiscal stimulus package from Beijing would support an AUD/USD return to the $0.67 handle.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar breakout from the $0.66500 handle would give the bulls a run at the $0.67286 resistance level.

Updates from the NPC, economic data from China, and US consumer inflation expectations need consideration.

However, a fall through the $0.66162 support level would bring the 200-day and 50-day EMAs into view.

A 14-period Daily RSI reading of 61.85 indicates an AUD/USD move to the $0.67286 resistance level before entering overbought territory.

4-Hourly Chart

The AUD/USD remained above the 50-day and 200-day EMAs, confirming the bullish price trends. On Friday, the 50-day EMA crossed through the 200-day EMA, another bullish signal.

A return to the $0.66500 handle would support a move toward the $0.67286 resistance level.

However, a break below the $0.66162 support level would give the bears a run at the 50-day and 200-day EMAs.

The 14-period 4-Hourly RSI at 67.93 suggests an AUD/USD return to the $0.66500 handle before entering overbought territory.