AUD to USD Forecast: China Trade Data and Sub-$0.65 in Play

Highlights

• This morning, investors will respond to NAB Business Confidence numbers from Australia and trade data from China.
• Later in the day, US trade data will also draw interest alongside Fed chatter.
• The near-term technical indicators remain bearish, signaling a return to sub-$0.6550.

On Monday, the AUD to USD rose by 0.14% to end the day at $0.65732. Dollar weakness supported the AUD to USD pairing, with FOMC member John Williams talking about rate cuts in 2024 if inflation softens. In contrast, FOMC member Michelle Bowman said more rate hikes will likely be needed. However, as vice chair of the Fed, Williams has more influence on the markets.

This morning, business confidence figures from Australia will draw interest early in the session. Economists forecast the NAB Business Confidence Index to fall from 0 to -1 in July.

However, trade data from China will have more impact later in the morning session. A sharper fall in imports and exports would align with the private sector PMI surveys and the weak demand environment. Disappointing trade data would weigh on riskier assets.

The Australian trade – GDP ratio stood at 45.8% in 2019 before declining as global trade terms deteriorated. As an exporter of commodities, weak global demand would adversely affect the Australian trade balance, the economy, and the Aussie dollar. Importantly, trade provides circa 20% of Australian jobs, a material consideration for the RBA. Weak trade figures from China would signal deteriorating trade terms.

The US Session

US trade data will be in focus later in the day. However, the numbers are unlikely to influence the Fed and, therefore, the AUD to USD.

The US trade – GDP ratio stood at 25.48% in 2021 and, importantly, is not a Fed focal point, limiting the impact of US trade data on the US dollar.

However, investors should monitor the news wires for Fed chatter with the media. Hawkish commentary would weigh on the AUD to USD.

AUD/USD Price Action

Daily Chart

The Daily Chart showed the AUD/USD hover above the $0.6545 – $0.6526 support band. However, the Aussie remained below the 50-day ($0.66866) and 200-day ($0.67393) EMAs, sending bearish near and longer-term price signals.

The 50-day EMA fell further from the 200-day EMA, sending bearish price signals.

Looking at the 14-Daily RSI, the 39.98 reading signals a bearish trend and supports a fall through the 0.6545 – 0.6526 support band to target sub-$0.65. However, an AUD/USD move through the $0.6600 – $0.6620 resistance band would give the bulls a run at the $0.6680 – $0.6700 resistance band and the 50-day EMA ($0.66866).

4-Hourly Chart

Looking at the 4-Hourly Chart, the AUD/USD sits above the $0.6545 – $0.6526 support band. However, the AUD/USD remains below the 50-day ($0.66204) and 200-day ($0.66878) EMAs, sending bearish near and longer-term price signals.

Significantly, the 50-day EMA pulled back from the 200-day EMA, supporting a fall through the $0.6545 – $0.6526 support band. However, an AUD/USD move through the $0.6600 – $0.6620 resistance band would give the bulls a run at the 50-day EMA ($0.66204).

Looking at the 14-4H RSI, the 46.20 reading reflects the bearish trend, with selling pressure outweighing buying pressure. The RSI aligns with the EMAs, signaling a fall through the $0.6545 – $0.6526 support band.