AUD to USD Forecast: Westpac Leading Index and RBA in Focus

Aussie Economic Indicators: Westpac Leading Index

On Wednesday, July 17, the Westpac Leading Index may influence buyer demand for the AUD/USD.

Economists forecast the Index to increase by 0.2% in June after stalling in May.

The Index gives a snapshot of the Australian economic outlook. Key components include unemployment expectations and consumer sentiment.

Upward consumer sentiment trends and improving sentiment toward the labor market could influence the RBA rate path.

Tighter labor market conditions could support wage growth and increase disposable income. Higher disposable income may fuel consumer spending and demand-driven inflation.

After a hotter-than-expected Australian Monthly CPI Indicator, a higher-than-expected increase in the Leading Index could leave an RBA rate hike on the table.

Aussie economic indicators could provide a better view of the RBA rate path. However, economists remain divided on the RBA’s next move.

What the Experts Say

Bloomberg TV APAC Chief Markets Editor David Ingles commented on the Monthly CPI Indicator. He said the inflation numbers led to a 50:50 chance of a September Fed rate cut.

However, Westpac Chief Economist Luci Ellis projected a November RBA rate cut, highlighting divided opinions about the RBA rate path.

Later in the session on Wednesday, US housing sector data could prove crucial.

US Economic Data: Housing Starts and Building Permits

Economists expect housing starts to increase by 3.1% in June after sliding by 5.5% in May.

Additionally, economists predict building permits to rise by 0.5% in June after falling by 2.8% in May.

Higher-than-expected housing data may boost demand for the US dollar, impacting the AUD/USD pairing.

The US housing sector is a bellwether of the US economy. Upward trends in demand for new homes could signal a robust US economy.

Furthermore, increasing supply could ease housing services inflationary pressures, a Fed focal point. Increased housing supply may reduce rents. Downward rent trends could dampen housing services and headline inflationary pressures.

US Housing Starts Paint a Grim Supply Picture

Peachtree Creek Investments founder Conor Sen commented on Q2 housing start numbers. He said,

“In Q2, multi-family housing starts were at their lowest level since Q1 2011, and a dozen of the US’s 50 largest metros saw zero new multi-family starts.”

Housing start trends reflected the effects of elevated interest rates on the real-estate sector.

Beyond the numbers, investors should monitor FOMC Member commentary.

FOMC Member Commentary and the Fed Rate Path

FOMC voting Members Thomas Barkin and Christopher Waller are on the calendar to speak. Views on inflation, the economic outlook, and the timing for a Fed interest rate cut could move the dial.

Short-Term Forecast: Bullish

Near-term AUD/USD trends may depend on labor market data. Tighter Aussie labor market conditions could greenlight a Q3 2024 RBA rate hike. Conversely, looser US labor market conditions may fuel speculation about a July Fed rate cut. A tilt in monetary policy divergence toward the Aussie dollar would support an AUD/USD move toward $0.70.

Investors should remain alert, with the Communist Party’s Third Plenum concluding on Thursday. Monitor the real-time data, news updates, and expert commentary to adjust your trading strategies.

Stay updated with our latest views and analysis to manage exposures to the forex markets.

AUD/USD Price Action

Daily Chart

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

An AUD/USD break above the $0.67500 handle would support a move to the $0.67967 resistance level. A breakout from the $0.67967 resistance level could give the bulls a run at the $0.68500 handle.

Updates from the Third Plenum, economic data, and FOMC Member commentary require consideration.

Conversely, an AUD/USD drop below the $0.67003 support level could give the bears a run at the 50-day EMA.

With a 14-period Daily RSI reading of 57.70, the AUD could move above the $0.67967 resistance level before entering overbought territory.