AUD to USD Forecast: China’s Woes and Fed’s Hawk Eye Weigh on Australian Dollar

Highlights

• Risk aversion and Australian employment numbers shut the door on the RBA and left the AUD/USD down 0.32% on Thursday.
• Hawkish Fed tone and China’s turmoil create a bearish price scenario for AUD/USD.
• Investors eye Beijing for stimulus chatter to ease Aussie dollar sell-offs.

Overview

On Thursday, the AUD/USD fell by 0.32% to wrap up the day at $0.64031. It was another bear trap for the bulls. The Aussie dollar fell to an early session low of $0.63643 before reaching a high of $0.64471. However, a bearish US session left the Australian dollar in negative territory.

China and the Fed Remain Headwinds on a Quiet Friday Session

There are no economic indicators from Australia or China to move the dial this morning. The lack of distraction will leave China’s woes and central banks in the spotlight.

While the PBoC attempts to boost growth, the latest Australian employment and wage growth numbers support an RBA hold. In contrast, US economic indicators and FOMC meeting minutes point to a Fed rate hike.

The combination is a bearish price scenario for the Aussie dollar. Commodities are more expensive with a stronger dollar, raising demand concerns. China’s economic turmoil and contagion risk add to the weak demand outlook.

While there are no economic indicators, investors should monitor the news wires for stimulus-related chatter from Beijing that would ease the selling pressure.

Quiet US Economic Calendar Leaves Fed Chatter in Focus

The US economic calendar is on the light side on Friday. There are no US economic indicators for investors to consider. The lack of US economic indicators will leave Fed monetary policy in the spotlight.

US retail sales, inflation, and labor market conditions continue to support a more aggressive interest rate trajectory to bring inflation to target. With the FOMC meeting minutes revealing an openness to more tightening, we expect AUD/USD sensitivity to Fed chatter.

Hawkish Fed commentary would support the shift in sentiment toward monetary policy divergence in favor of the dollar.

AUD/USD Price Action

Daily Chart

The Daily Chart showed the AUD/USD hover below the $0.6430 – $0.6450 resistance band. Significantly, the Aussie remained below the 50-day and 200-day EMAs, sending bearish near and longer-term price signals.

Looking at the 14-Daily RSI, 27.87 shows the AUD/USD in oversold territory. However, the RSI aligns with the EMAs, signaling a fall to sub-$0.6350 to bring the $0.6340 – $0.6320 support band into play. Avoiding sub-$0.6350 would support a move through the $0.6430 – $0.6450 resistance band to target the Thursday high of $0.64507.

4-Hourly Chart

Looking at the 4-Hourly Chart, the AUD/USD remains below the $0.6430 – $0.6450 resistance band. Significantly, the AUD/USD sits below the 50-day and 200-day EMAs, sending bearish near and longer-term price signals.

Looking at the 14-4-Houly RSI, 36.58 affirms the bearish sentiment, with selling pressure overweighing buying pressure. The RSI is aligned with the EMAs supporting a fall to sub-$0.6350 to give the bears a run at the $0.6340 – $0.6320 support band. However, a move through the lower level of the $0.6430 – $0.6450 resistance band would bring the Thursday high of $0.64507 into play.

Price action today is hinged on central bank commentary.