AUD to USD Forecast: Chinese Industrial Profits in Focus

Highlights

• The AUD/USD gained 0.48% on Tuesday, ending the session at $0.68241.
• On Wednesday, industrial profit numbers from China will draw investor interest.
• US state private sector data will be focal points later in the session.

Friday Overview of the AUD/USD

The AUD/USD gained 0.48% on Tuesday, ending the session at $0.68241. The Australian dollar fell to a low of $0.67913 before rising to a high of $0.68270.

Chinese Industrial Profits in Focus

On Wednesday, industrial profit numbers from China will garner investor interest. Weaker year-over-year figures could impact the buyer appetite for the Aussie dollar.

Weak numbers would signal a weakening demand environment, which could impact the Australian economy. China accounts for one-third of Australian exports. Australia has a trade-to-GDP ratio exceeding 50%, with 20% of the Australian labor force in trade-related jobs.

Industrial profits increased by 2.7% in October vs. 11.9% in September and 17.2% in August.

US Private Sector in the Spotlight

Richmond and Dallas private-sector numbers for December will draw investor interest. Better-than-expected figures will raise bets on a US soft landing.

Economists forecast the Richmond Fed Manufacturing Index to fall from -5 to -6. Significantly, economists expect the Richmond Fed Services Index to remain at 1. Economists predict the Dallas Fed Services Index to rise from -11.6 to -11.5.

However, the numbers are unlikely to impact bets on a Q1 2024 Fed rate cut.

According to the CME FedWatch Tool, there is a 70.6% chance of a 25-basis point rate cut in March. On December 22, the probability of a 25-basis point March rate cut was 75.6%.

Short-Term Forecast

Near-term Australian dollar trends will likely hinge on economic indicators from China and the US economic calendar. Rising bets on a Fed rate cut and a pickup in economic activity in China would be a boon for the Aussie dollar.

AUD/USD Price Action

Daily Chart

The AUD/USD remained above the 50-day and 200-day EMAs, with the EMAs sending bullish price signals.

An AUD/USD return to $0.68500 would give the bulls a run at the $0.68944 resistance level.

The Chinese economy and the US economic calendar will be the focal points of the Wednesday session.

However, a fall through the $0.68096 support level would bring the $0.67286 support level into view.

A 14-period Daily RSI reading of 70.84 shows the AUD/USD in overbought territory (typically above 70 on the RSI scale). Selling pressure could intensify at the $0.68500 handle.

4-Hourly Chart

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

An AUD/USD break above the $0.68500 handle would support a move to the $0.68944 resistance level.

However, a fall through the $0.68096 support level would give the bears a run at the 50-day EMA and the $0.67286 support level.

The 14-period 4-Hourly RSI at 65.17 indicates an AUD/USD move to the $0.68500 handle before entering overbought territory.