AUD to USD Forecast: Decoding Aussie Dynamics from Q1 GDP to Services PMI

Australian Services and First Quarter Economic Growth

On Wednesday (June 5), the Australian economy will be in the spotlight. Finalized Services PMI numbers drew investor interest before GDP figures for Q1 2024.

The Judo Bank Services PMI fell from 53.6 to 52.5 in May, down from a preliminary 53.1. An upward trend in employment and steeper increases in input prices could draw the attention of the RBA.

However, the GDP numbers will likely impact the AUD/USD more. Economists forecast the Australian economy to expand by 0.2% quarter-on-quarter in Q1 2024 after growing by 0.2% in Q4 2023.

Weaker-than-expected numbers could raise investor bets on a 2024 RBA rate cut. However, employment and inflation remain the focal points for the RBA.

Furthermore, Service sector data from China will garner investor interest. Economists forecast the Caixin Services PMI to increase from 52.5 to 52.6 in May. Better-than-expected numbers could drive buyer demand for the Aussie dollar.

An improving macroeconomic environment could bolster demand. China accounts for one-third of Australian exports. Australia has a trade-to-GDP ratio above 50%, with 20% of the workforce in trade-related jobs. Upward trends in demand could boost the Australian economy and the Aussie dollar.

US Economic Calendar: ISM Services PMI and ADP Nonfarm Employment

Later in the Wednesday session, ADP employment change numbers for May could influence the Fed rate path.

Economists expect the ADP to report a 173k increase in employment after a rise of 192k in April. Weaker-than-expected numbers may raise investor expectations of a September Fed Rate cut. A deterioration in labor market conditions could affect wage growth and consumer confidence. Consumers could curb spending, dampening demand-driven inflationary pressures.

Additionally, economists predict the ISM Services PMI to increase from 49.4 to 50.5 in May. Higher-than-expected numbers could sink investor bets on a September Fed rate cut. The services sector contributes over 70% to the US economy. Moreover, housing services sector prices remain a focal point for the Fed amidst the sticky interest rate environment.

Beyond the headline figure, prices, new orders, and employment trends could move the dial.

Short-Term Forecast

Near-term AUD/USD trends will hinge on the Aussie GDP numbers, US Services PMI numbers, and the US Jobs Report. Hotter-than-expected US labor market and Services PMIs could reduce investor bets on a September Fed rate cut. Falling bets on a September Fed rate cut would tilt monetary policy divergence toward the US dollar.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar breakout from the $0.66500 handle would support a move to the $0.67003 resistance level. A break above the $0.67003 resistance level could give the bulls a run at the $0.67500 handle.

Services PMIs, Australian GDP, and US ADP employment numbers need consideration.

Conversely, an AUD/USD break below the $0.66000 handle could signal a fall toward the 50-day EMA. A drop below the 50-day EMA may give the bears a run at the 200-day EMA and the $0.65760 support level.

With a 14-period Daily RSI reading of 54.12, the AUD/USD may return to the $0.67500 handle before entering overbought territory.