AUD to USD Forecast: US Inflation, the Fed Dilemma, and Aussie Dollar’s Path

China: New Loans and Stimulus Hopes

On Wednesday, economic indicators from China could influence AUD/USD trends. New loan data from China will be in focus. A rebound in new loans could signal an improving demand environment. Investors expect the PBoC to continue implementing measures to bolster the Chinese economy. New loan figures for March could provide early indications of the effectiveness of PBoC measures.

Economists forecast new loans to increase from 1,450 billion Yuan to 3,700 billion Yuan in March.

Improving macroeconomic conditions in China could be a boon for the Australian economy and the Aussie dollar. China accounts for one-third of Australian exports, and Australia has a trade-to-GDP ratio above 50%. Moreover, 20% of the Australian workforce is in trade-related jobs.

Increased demand from China could influence Australian labor market conditions, consumer spending, and inflation.

While new loan figures warrant investor attention, investors should monitor stimulus chatter from Beijing. China set a growth target of 5% for 2024. Economists remain convinced that Beijing needs to roll out a fiscal stimulus package to achieve 5% growth.

Hopes for a stimulus package and improving US-China relations supported a rebound in iron ore prices. Iron ore futures are up 7.37% this week.

There are no economic indicators from Australia for investors to consider.

US Economic Calendar: US CPI Report and the Fed

On Wednesday, the all-important US CPI Report warrants investor attention. Economists forecast the US core annual inflation rate to ease from 3.8% to 3.7% in March. However, economists expect the annual inflation rate to accelerate from 3.2% to 3.4%.

Hotter-than-expected numbers could sink investor bets on a June Fed rate cut. Recent economic indicators raised expectations of the US avoiding an economic recession. The US Jobs Report signaled higher wages and consumer spending. Upward trends in consumer spending could fuel demand-driven inflation.

The Fed may delay interest rate cuts in response to a tighter US labor market and higher consumer prices. A higher-for-longer Fed rate path could impact borrowing costs, reduce disposable income, and curb spending.

With the US CPI Report in the spotlight, investors should monitor FOMC member chatter. Reactions to the US CPI Report and views on the timing of interest rate cuts could move the dial. FOMC member Austan Goolsbee is on the calendar to speak. The CPI Report will likely limit the influence of the FOMC Meeting Minutes, which are out later in the session.

Short-Term Forecast

Near-term AUD/USD trends will likely hinge on the US CPI Report and the Fed. Higher-than-expected consumer prices could impact investor bets on a June Fed rate cut. FOMC member calls to delay Fed interest rate cuts could tilt monetary policy divergence toward the US dollar.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar break above the $0.66500 handle could give the bulls a run at the $0.67003 resistance level.

Economic indicators from China, the US CPI Report, and Fed chatter need consideration.

Conversely, an AUD/USD drop below the $0.66 handle would bring the 200-day EMA and $0.65760 support level into play. A break below the $0.65760 support level could signal a fall to the 50-day EMA.

Given a 14-period Daily RSI reading of 61.36, the AUD/USD may return to the $0.67003 resistance level before entering overbought territory.