AUD to USD Forecast: China Trade and the RBA’s Influence on Aussie Dollar

Highlights

• The AUD/USD declined 0.36% on Monday and ended the session at $0.64887.
• On Tuesday, China trade data will garner investor interest.
• However, the RBA interest rate decision and forward guidance will likely dictate near-term trends for the AUD/USD.

Monday Overview of the AUD/USD

The AUD/USD declined by 0.36% on Monday. Following the 1.22% surge on Friday, the Aussie dollar ended the day at $0.64887. The Aussie dollar rose to a high of $0.65228 before falling to a low of $0.64849.

China Trade and the RBA in the Spotlight

On Tuesday, trade data from China warrants consideration before the RBA interest rate decision. China accounts for one-third of Australian exports. With an Australian trade-to-GDP ratio of over 50%, weak demand would adversely impact the Australian economy and the Aussie dollar.

Investors may find relief from the Chinese government’s plans to improve trade relations. However, a weakening demand backdrop may overshadow Beijing pledges.

While the trade data will affect the AUD/USD, the RBA interest rate decision and press conference will be the focal point. Economists forecast the RBA to raise the cash rate by 25 basis points to 4.35%. Unless there is a surprise decision to hold interest rates, investors must focus on the rate statement.

Commitment to lift rates further in December to combat inflation (hawkish) would drive buyer demand for the Aussie dollar. Investors must decipher whether the RBA delivered a one-and-done or is willing to raise rates further.

US Trade Data and FOMC Members in the Spotlight

On Tuesday, US trade data will be in focus. However, the numbers are unlikely to influence market sentiment toward the Fed interest rate path. FOMC member speeches will need consideration.

FOMC voting members Michael Barr, Lorie Logan, Christopher Waller, and John Williams are on the calendar to speak. Fed Vice Chair John Williams tends to have more influence on investor sentiment toward the Fed rate path.

Short-Term Forecast

Near-term trends hinge on the RBA interest rate decision and rate statement. A hawkish rate hike could tip monetary policy divergence toward the Aussie dollar. In contrast to the RBA, investors are betting on a June 2024 Fed cut.

AUD/USD Price Action

Daily Chart

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

A break above the $0.64900 resistance level would support a move toward the 200-day EMA and the $0.66162 resistance level.

China trade data and the RBA interest rate decision/rate statement will be the focal points on Tuesday.

A dovish RBA rate hike or a surprise hold would support a drop below $0.64500 to target the 50-day EMA.

A 14-period Daily RSI reading of 61.31 suggests a move to the 200-day EMA before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

The AUD/USD remains above the 50-day and 200-day EMAs, sending bullish price signals. Following a bullish cross on Friday, the 50-day EMA continued to pull away from the 200-day EMA, also a bullish signal.

A breakout from the $0.64900 resistance level would give the bulls a run at the $0.66162 resistance level.

However, a fall below $0.64500 would bring the 50-day EMA into view.

The 14-period 4-Hourly RSI at 63.39 indicates an AUD/USD move to $0.65500 before entering overbought territory.