AUD to USD Forecast: Service Sector PMIs and Fed Speakers in Focus

Highlights

The AUD/USD gained 0.05% on Wednesday, closing the session at $0.65517.

On Thursday, Australian private sector PMIs garnered interest in the early hours.

US services PMI, jobless claims, and Fed speakers will also warrant investor attention amidst increasing monetary policy uncertainty.

Wednesday Overview of the AUD/USD

The AUD/USD rose by 0.05% on Wednesday. Following a 0.16% gain on Tuesday, the Australian dollar ended the session at $0.65517. The Australian dollar rose to a high of $0.65732 before falling to a Wednesday low of $0.65446.

Prelim Private Sector PMIs Set the Tone

On Thursday, preliminary February private sector PMIs for Australia were in focus in the early hours. The Services PMI warranted more investor attention, accounting for over 60% of the Australian economy.

The Judo Bank Services PMI increased from 49.1 to 52.8 in February. Economists forecast an increase to 50.2. After the hotter-than-expected Q4 wage growth numbers, the prices sub-component could influence the RBA interest rate trajectory.

According to the preliminary survey, input price inflation increased for the first time in three months. Rising labor costs contributed to the pickup in input price inflation. Firms passed on the rising costs, with selling prices rising at a more marked pace.

Beyond the economic calendar, stimulus chatter from Beijing also warrants investor attention.

US Economic Calendar: US Services PMI, the Labor Market, and Fed Speeches

On Thursday, private sector PMI numbers for February will garner investor interest. However, the Services PMI will likely impact the AUD/USD pair more. The services sector accounts for over 70% of the US economy, with services a contributor to inflation.

Economists forecast the S&P Global Services PMI to decline from 52.5 to 52.0 in February. Beyond the headline number, investors must consider the sub-components, including prices and job creation trends.

An upward trend in prices and the rate of job creation could signal more intense inflationary pressures. The Fed may need to delay cutting interest rates to impact borrowing costs and disposable income. Downward trends in disposable income could curb consumer spending and dampen demand-driven inflation.

While the Services PMI will move the dial, investors must consider US jobless claims. Tight labor market conditions support consumer confidence and wage growth. The net effect could be an upward trend in consumer spending and demand-driven inflationary pressures.

Economists forecast initial jobless claims to increase from 212k to 217k in the week ending February 17.

Beyond the numbers, FOMC member chatter could also move the dial. FOMC members Jefferson and Cook are on the calendar to speak. Reaction to the recent US inflation data and Services PMI could influence market bets on an H1 2024 Fed rate cut.

AUD/USD: Short-Term Forecast

Short-term AUD/USD trends will hinge on private-sector PMIs and central bankers. Upward trends in Australian private sector prices could tilt monetary policy divergence toward the Aussie dollar. While the RBA left rate hikes on the table, the Fed has yet to reconsider rate hikes to tame inflation.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar break out from the 50-day EMA would support a move to the 200-day EMA and the $0.66162 resistance level.

On Thursday, China, service sector PMIs, and Fed chatter need consideration.

However, an AUD/USD drop below the $0.65500 handle would give the bears a run at the $0.64900 support level.

A 14-period Daily RSI reading of 49.35 suggests an AUD/USD drop below the $0.64900 support level before entering oversold territory.

4-Hourly Chart

The AUD/USD remained above the 50-day EMA but below the 200-day EMA, sending bullish near-term but bearish longer-term price signals.

An AUD/USD breakout from the 200-day EMA would support a move to the $0.66162 resistance level.

However, an AUD/USD break below the 50-day EMA would bring the $0.64900 support level into play.

The 14-period 4-Hourly RSI at 55.41 suggests an AUD/USD move to the $0.66162 resistance level before entering overbought territory.