AUD to USD Forecast: Speculation Over RBA Rate Moves Amid U.S. Economic Shifts

Australian Business Confidence and the RBA

Business confidence numbers from Australia will likely impact buyer demand for the AUD/USD on Tuesday (June 11).

Economists forecast the NAB Business Confidence Index to decline from +1 to zero in May. Downward trends in business confidence could signal a deteriorating macroeconomic environment. Firms could kickstart cost-cutting efforts to maintain profit margins. Significantly, cost-cutting moves may directly affect the Australian labor market.

Weaker labor market conditions could impact wage growth and disposable income. Downward disposable income trends may affect consumer spending further and dampen demand-driven inflation.

In April, the NAB Employment Index fell from +6 to +2. A drop into negative territory would signal a decline in employment.

In recent RBA press conferences, RBA Governor Michele Bullock highlighted the importance of the labor market. Signs of a deteriorating labor market environment could force the RBA to reconsider its policy goals for H2 2024.

Moreover, weaker business confidence may reduce speculation about an RBA rate hike despite the elevated inflation environment.

US Economic Calendar: Business Optimism in Focus Pre-Fed

Later in the session on Tuesday, the NFIB Business Optimism Index will be in focus.

Economists forecast the NFIB Business Optimism Index to increase from 89.7 to 89.8 in May. Upward trends in business optimism could signal a pickup in business investment and job creation.

After the recent US Job Report, expectations of a pickup in hiring could support wage growth and increase disposable income. Higher trends in disposable income may fuel consumer spending and demand-driven inflation. The net effect could be a higher-for-longer Fed rate path to raise borrowing costs and reduce disposable income.

While the numbers need consideration, the markets will also look ahead to the US CPI Report (Wed) and the Fed interest rate decision, economic projections, and press conference.

Following the recent pickup in wage growth, hotter-than-expected inflation numbers could affect investor expectations of multiple 2024 Fed rate cuts.

Short-Term Forecast

Near-term AUD/USD trends will hinge on the US CPI Report and FOMC economic projections. Hotter-than-expected US inflation numbers and hawkish adjustments may tilt monetary policy divergence toward the US dollar.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar move through the $0.66500 handle would support an AUD/USD run at the $0.67003 resistance level. A break above the $0.67003 resistance level would bring the $0.67500 handle into play.

Australian business confidence numbers and investor sentiment toward the Fed rate path need consideration.

Conversely, an AUD/USD fall through the 50-day EMA could give the bears a run at the 200-day EMA and the $0.65760 support level. Furthermore, a fall through the $0.65760 support level could signal a drop to the $0.65500 handle.

With a 14-period Daily RSI reading of 48.64, the AUD could break below the $0.65500 handle before entering oversold territory.