AUD to USD Forecast: Will Strong China Manufacturing PMIs Propel the Aussie Dollar?

The Manufacturing Sector in the Spotlight

On Monday (June 3), finalized manufacturing sector PMI numbers drew investor interest early in the session.

The Judo Bank Manufacturing PMI increased from 49.6 to 49.7 in May, up from a preliminary 49.6. Notably, new export orders increased for the first time since 2022. Furthermore, firms increased headcounts, with input and output prices accelerating mid-way through Q2 2024.

While the numbers attracted investor attention, the Manufacturing PMI will unlikely influence the RBA rate path, contributing less than 10% to the economy.

Nevertheless, Manufacturing PMI numbers from China will impact investor bets on a 2024 RBA rate cut.

Economists forecast the Caixin Manufacturing PMI to increase from 51.5 to 51.6 in May. Better-than-expected numbers could reduce investor bets on a 2024 RBA rate cut and drive buyer demand for the Aussie dollar.

China accounts for one-third of Australian exports. Furthermore, Australia has a trade-to-GDP ratio of over 50%, with 20% of the workforce in trade-related jobs. An improving demand environment could boost Australian labor market conditions and the economy.

US Economic Calendar: Manufacturing in the Spotlight

Later in the Monday session, the ISM Manufacturing PMI will need consideration. A more marked contraction across the US manufacturing sector could trigger investor concerns about a potential hard landing in the US. Nevertheless, the manufacturing sector contributes less than 30% to the US economy, limiting its influence on the Fed rate path.

Economists forecast the ISM Manufacturing PMI to increase from 49.2 to 49.8 in May.

Other stats include finalized S&P Global Manufacturing PMI numbers for May. However, these will likely play second fiddle to the more influential ISM Manufacturing PMI survey-based data.

There are no FOMC member speeches to consider. The FOMC entered the blackout period on Saturday (June 1).

Short-Term Forecast

Near-term AUD/USD trends will likely hinge on private sector PMIs from China, Aussie GDP numbers, and the US economic calendar. Hotter-than-expected data from the US could sink investor bets on a September rate cut and tilt monetary divergence toward the US dollar.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar breakout from the $0.66500 handle could signal a move to the $0.67003 resistance level. An AUD/USD move through the $0.67003 resistance level would bring the $0.67500 handle into play.

Manufacturing sector PMIs from Australia, China, and the US need consideration.

Conversely, an AUD/USD drop below the $0.66 handle would give the bears a run at the 50 and 200-day EMAs and the $0.65760 support level. Buyer appetite could increase at the $0.65760 support level. The 200-day EMA is confluent with the support level.

With a 14-period Daily RSI reading of 56.25, the AUD/USD may return to the $0.67500 handle before entering overbought territory.