AUD to USD Forecast: Impacts of Australian Profits and Building Approvals

Friday Overview of the AUD/USD

The AUD/USD rose by 0.38% on Friday. Following a 0.03% gain on Thursday, the Australian dollar ended the session at $0.65220. The Australian dollar fell to a low of $0.64895 before rising to a high of $0.65339.

Aussie Stats: Building Approvals and Company Gross Profits

On Monday, company gross profits and building approval data will warrant investor attention.

Economists forecast company gross profits to increase by 1.8% quarter-on-quarter in Q4 compared with a 1.3% decline in Q3.

A recovery in corporate profits would signal a pickup in consumer spending in Q4. Consumer spending can drive corporate profits.

An improving business environment may also signal an upward trend in job creation. A tighter labor market could support wage growth and increase disposable income. Upward trends in disposable income may fuel consumer spending and demand-driven inflation.

However, the elevated inflation environment and the effect of interest rates on rents and mortgages may impact gross profits in 2024. Concerns about the lasting effects of inflation and interest rates on household spending could limit the influence on the AUD/USD.

Building approval figures for January also need consideration. Economists expect building approvals to increase by 4% after sliding by 9.5% in December.

A rebound in building approvals would increase inventories and provide rent relief. A softer rent outlook could dampen inflationary pressures and enable the RBA to consider cutting interest rates. However, investors must consider trends in building approvals, with isolated monthly figures prone to sizeable swings.

Beyond the numbers, China remains a focal point. The National People’s Congress begins on Tuesday.

US Economic Calendar: Fed Speakers in the Spotlight

On Monday, investors must monitor FOMC member speeches throughout the session. FOMC member Patrick Harker is on the calendar to speak.

Reactions to the recent inflation numbers and consumer sentiment report warrant investor attention. Softer Core PCE Price Index and consumer sentiment numbers supported bets on a June Fed rate hike.

However, FOMC members remain concerned about inflation and need confidence inflation will sustainably fall toward the target. Hawkish comments about inflation and the timeline for rate cuts could move the dial.

In February, Harker said interest rates would decrease in 2024. Harker also cautioned against expecting rate cuts around the corner. He needed a couple of meetings to be confident about inflation trends, signaling a May/June rate cut.

Short-Term Forecast

Near-term AUD/USD trends will hinge on US services PMI numbers, the US Jobs Report, and Fed Chair Powell. A pickup in US service sector activity and a tighter US labor market could impact investor bets on a June Fed rate cut. A hotter-than-expected US Jobs Report may also tilt monetary policy divergence toward the US dollar.

AUD/USD Price Action

Daily Chart

The AUD/USD hovered below the 50-day and 200-day EMAs, affirming bearish price signals.

An Aussie dollar breakout from the $0.65500 handle would support a move to the 50-day EMA. A break above the 50-day EMA would bring the 200-day EMA and the $0.66162 resistance level into view.

Australian corporate profits, building approvals, Fed chatter, and China need consideration.

However, a break below the $0.64900 support level could signal a drop to the $0.63853 support level.

A 14-period Daily RSI reading of 45.68 suggests an AUD/USD fall to the trend line before entering oversold territory.

4-Hourly Chart

The AUD/USD sat below the 50-day and 200-day EMAs, confirming the bearish price trends.

An AUD/USD breakout from the 50-day EMA would bring the 200-day EMA into play.

However, a drop below the $0.64900 support level would give the bears a run at the trend line and the $0.63853 support level.

The 14-period 4-Hourly RSI at 51.40 suggests an AUD/USD move to the $0.66162 resistance level before entering overbought territory.