AUD to USD Forecast: Will Chinese Trade Data Propel the Australian Dollar?

Can a pickup in Chinese exports boost the Aussie economy and the Australian dollar?

On Friday, July 12, trade data from China could influence buyer appetite for the AUD/USD.

Economists forecast exports to increase 8.0% year-on-year in June after rising 7.6% in May. A marked increase in exports may signal an improving demand environment and ease concerns about the Chinese economy.

However, investors should also consider import trends. Higher imports may indicate a sustained increase in demand. Economists expect imports to rise 2.8% year-on-year in June after an increase of 1.8% in May.

Increased economic activity in China could boost the Australian economy and the Aussie dollar.

The Aussie Economy and China

China accounts for one-third of Australian exports. Australia has a trade-to-GDP ratio of over 50%, with 20% of its workforce in trade-related jobs. Increased demand from China could fuel job creation and wage growth. Rising wages can increase disposable income, fuel consumer spending, and demand-driven inflation.

Upward Australian consumer price trends could force the RBA to consider raising interest rates. Higher interest rates increase borrowing costs and reduce disposable income, which can tame inflation.

Trade terms for June could influence the Australian economy. However, trade wars between China and the West could adversely affect the Australian economy and the Aussie dollar. Tariffs on exports from China could result in a marked decline in exports.

Will China increase exports in June as it faces fresh tariffs from global economies, including the EU and the US?

Investors should monitor China’s trade data over the next few months  to assess the impact of tariffs on exports.

US Producer Prices Under the Spotlight Amidst Fed Rate Cut Hopes

Later in the session on Friday, US producer prices will face scrutiny after the CPI Report.

Economists forecast producer prices to increase 2.3% year-on-year in June after rising 2.2% in May.

Higher-than-expected numbers could signal a pickup in demand-driven inflationary pressures. Producers increase prices as demand rises, passing costs onto consumers.

Other US data needing consideration include the Michigan Consumer Sentiment Report.

Will Consumer Inflation Expectations Influence the Fed Rate Path?

Additionally, the US Michigan Consumer Sentiment Report could also influence the Fed rate path. Two focal points include consumer sentiment and inflation expectations.

Economists forecast the Michigan Consumer Sentiment Index to rise from 68.2 in June to 68.5 in July.

Upward trends in consumer sentiment may indicate a pickup in consumer spending. Higher consumer spending could fuel demand-driven inflation.

However, trends in inflation expectations can affect the outlook for consumer spending. Falling inflation expectations may indicate a pullback in retail sales. Consumers may delay purchases if they think prices will decline.

Economists forecast inflation expectations to remain at 3.0% in July. Consumers may consider 3% elevated, which may affect spending in the near term.

Short-Term Forecast: Bullish

Near-term AUD/USD trends will depend on the trade data from China and the US economic calendar. Softer US producer prices and inflation expectations could raise bets on a September Fed rate cut. Additionally, upbeat trade data from China could fuel appetite for the Aussie dollar.

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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 $0.67967 resistance level would support a move toward the $0.68500 handle.

China trade data, Michigan Inflation Expectations, and US producer prices will require consideration.

Conversely, an AUD/USD drop below the $0.67500 handle could signal a fall to the $0.67003 support level.

With a 14-period Daily RSI reading of 66.88, the AUD may move through the $0.67967 resistance level before entering overbought territory.