AUD to USD Forecast: China’s Rates Decision and US Labor Data in Focus

People’s Bank of China and the Chinese Economy

The People’s Bank of China (PBoC) could influence buyer demand for the AUD/USD on Thursday, June 20.

Economists expect the PBoC to leave the 1-year and 5-year loan prime rates (LPR) unchanged at 3.45% and 3.95%, respectively.

Loan prime rates are the lending rates for corporate and household loans. An unexpected cut to the 1-year or 5-year LPRs could boost economic activity and drive buyer demand for the Aussie dollar.

Lower lending rates may increase borrowing, business investment, and consumer spending.

An improving demand environment in China may support the Australian economy and the Aussie dollar.

China, the Australian Economy, and the RBA Rate Path

China accounts for one-third of Australian exports. Australia has a trade-to-GDP ratio of over 50%, with 20% of its workforce in trade-related jobs. Better Australian labor market conditions could increase wages and disposable income and fuel consumer spending and demand-driven inflationary pressures.

Given the sticky inflation environment, tighter Australian labor market conditions may increase investor expectations for a 2024 RBA rate hike.

On Tuesday, June 18, RBA Governor Michele Bullock warned that RBA board members considered an interest rate hike to tame inflation.

US Economic Calendar: Jobless Claims and the Philly Fed Manufacturing Index

Later in the session on Thursday, US labor market and manufacturing sector data warrant investor attention.

US jobless claims and the Philly Fed Manufacturing Index will likely influence the AUD/USD more.

Economists forecast initial jobless claims to fall from 242k to 235k in the week ending June 15.

A larger-than-expected fall in jobless claims could reduce investor expectations of a September Fed rate cut. Tighter labor market conditions would support uptrends in wage growth and disposable income. The Fed could respond by leaving interest rates unchanged. A higher-for-longer Fed rate path may raise borrowing costs and reduce disposable income and consumer spending.

Moreover, investors will likely consider the Philly Fed Manufacturing Index.

Economists forecast the Philly Fed Manufacturing Index to remain at 4.5 in June. An unexpected fall could test investor expectations of a soft landing. However, the US manufacturing sector accounts for less than 30% of the US economy and is unlikely to influence the Fed rate path.

Other stats include housing sector data. However, barring a sharp decline in building permits and housing starts, the stats will likely play second fiddle to the jobless claims and Philly Fed numbers.

Beyond the numbers, investors should monitor FOMC member chatter. Reactions to the recent retail sales data and views on the timing of interest rate cuts could move the dial. FOMC Member Thomas Barkin is on the calendar to speak.

Short-Term Forecast

Near-term AUD/USD trends will hinge on US labor market data, services sector PMIs (June 21), and central banks. Weaker-than-expected labor data from the US and policy support from Beijing could tilt monetary policy divergence toward the Aussie dollar.

AUD/USD Price Action

Daily Chart

The AUD/USD sat comfortably 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.

The PBoC, US Jobless Claims, and Fed chatter require investor consideration.

Conversely, an AUD/USD drop below the $0.66500 handle could bring the 50-day EMA into play. An AUD/USD drop below the 50-day EMA could give the bears a run at the 200-day EMA and the $0.65760 support level.

With a 14-period Daily RSI reading of 56.22, the AUD may break above the $0.67500 handle before entering overbought territory.