AUD to USD Weekly Forecast: Key Aussie and US Economic Indicators to Watch

Weekly Overview of the AUD/USD in the Week Ending May 31, 2024

In the week ending on May 31, the AUD/USD advanced by 0.39% to end the week at $0.66523. The AUD/USD climbed to a Monday high of $0.66798 before falling to a Thursday low of $0.65907.

The Australian Economic Calendar

On Monday (June 3), finalized manufacturing PMI numbers and ANZ-Indeed Job Ads will warrant investor attention.

Barring a marked revision to the preliminary PMI, the labor market numbers will likely impact the Aussie dollar more.

Weaker labor market conditions could affect wage growth and reduce disposable income. Downward trends in disposable income may reduce consumer spending and dampen demand-driven inflation. A softer inflation outlook could raise investor bets on a 2024 RBA rate cut.

Economists forecast ANZ-Indeed Job Ads to fall by 1.2% in May after rising by 2.8% in April.

Company gross operating profits and finalized retail sales figures will garner investor interest on Tuesday (June 4).

Downward trends in gross operating profits would signal a deteriorating macroeconomic environment, which may influence the RBA rate path. Economists forecast company gross operating profits to decline by 0.9% in Q1 2024 after surging 7.4% in Q4 2023.

Furthermore, retail sales increased by 0.1% in April. Downward revisions to preliminary retail sales could also raise investor bets on a 2024 RBA rate cut. Downward trends in retail sales figures may dampen demand-driven inflationary pressures.

On Wednesday (June 5), GDP numbers for Q1 will impact buyer demand for the Aussie dollar. Economists forecast the Australian economy to expand by 0.2% after growing by 0.2% in Q4 2023.

Trade Terms and the Chinese Economy

Trade data for April will need consideration on Thursday (June 6). Upward trends in imports and exports would signal an improving demand environment. Australia has a trade-to-GDP ratio of over 50%, with 20% of the workforce in trade-related jobs.

Higher exports and a wider trade surplus would be Aussie dollar price-positive. However, the stats are unlikely to influence the RBA rate path, with the RBA focused on wages, household spending, and inflation.

Economists forecast imports and exports to increase by 3.7% and 0.4%, respectively. Moreover, economists expect the trade surplus to widen from A$5.024 billion to A$5.500 billion in April.

While economic indicators from Australia need consideration, data from China will also attract investor attention.

On Monday, the China Caixin Manufacturing PMI will be in focus, with economists expecting the PMI to increase from 51.4 to 51.5 in May. Moreover, economists predict the Caixin Services PMI to advance from 52.5 to 52.6 in May.

An improving macroeconomic environment could signal a pickup in demand from China. China accounts for one-third of Australian exports. Rising demand could boost the Australian economy and the Aussie dollar.

US Economic Calendar: Labor Market Data, Services PMIs, and the Fed

On Monday, the manufacturing sector will be in focus, with the ISM Manufacturing PMI warranting investor attention. A more marked contraction across the US manufacturing sector could retrigger fears of a US hard landing. However, the manufacturing sector PMIs will unlikely influence the Fed rate path. The manufacturing sector accounts for less than 30% of the US economy.

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

Factory orders and JOLTs Job Openings will attract investor interest on Tuesday. Barring an unexpected slide in US factory orders, the labor market data will likely impact the AUD/USD more.

A larger-than-expected fall in job openings could signal weaker labor market conditions. Fewer job openings could ease upward pressure on wages, reducing disposable income. Downward trends in disposable income would dampen demand-driven inflation and allow for a less hawkish Fed rate path.

Economists forecast JOLTs Job Openings to fall from 8.488 million to 8.350 million in April.

On Wednesday, the ISM Services PMI and ADP Employment Change numbers need consideration. Both reports will likely influence investor bets on a September Fed rate cut.

Economists expect the ADP to report a 180k increase in employment in May. Additionally, economists predict the ISM Services PMI to rise from 49.4 to 50.5 in May.

Significantly, the services sector accounts for over 70% of the US economy. A sharper contraction across the US services sector would fuel fears of a US hard landing. Investors should consider the sub-components, including input prices and employment. Weaker job creation rates and input prices could signal a softer inflation outlook.

The US labor market will remain the focal point on Thursday and Friday, with initial jobless claims and the US Jobs Report due for release.

The US Labor Market to Dictate the Fed Rate Path

Economists forecast initial jobless claims to fall from 219k to 215k in the week ending June 1. An unexpected increase in jobless claims would increase investor expectations of a September Fed rate cut.

However, the US Jobs Report will affect buyer demand for the US dollar more.

Economists forecast average hourly earnings to increase 3.9% year-on-year in May after advancing 3.9% in April. Softer-than-expected wage growth figures would support a September Fed rate cut. Additionally, economists predict nonfarm payrolls to increase by 180k and a steady unemployment rate of 3.9%. Nonfarm payrolls increased by 175k in April.

A lower-than-expected increase in nonfarm payrolls and a higher unemployment rate would trigger bets on a September Fed rate cut.

Despite the busy US economic calendar, there are no Fed speeches for investors to monitor. The FOMC blackout period began on June 1.

Short-Term Forecast:

The near-term trend for the AUD/USD will hinge on Aussie retail sales and GDP numbers, the US ISM Services PMI, and the US Jobs Report. Nevertheless, the US labor market and service sector numbers will likely dictate buyer appetite for the AUD/USD.

Weaker-than-expected numbers could cement bets on a September Fed rate cut and tilt monetary policy divergence toward the Aussie dollar. Recent inflation numbers from Australia poured cold water on the chances of a 2024 RBA rate cut.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar breakout from the $0.66500 handle could give the bulls a run at the $0.67003 resistance level. Furthermore, a break above the $0.67003 resistance level would support a move toward the $0.67500 handle.

Aussie retail sales, Aussie GDP, US Services PMI, and US labor market data need consideration.

Conversely, an AUD/USD break below the 50-day EMA would bring the 200-day EMA and the $0.65760 support level into play. A fall through the $0.65760 support level could signal a drop toward the $0.64582 support level. However, buying pressure may intensify 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 could break above the $0.67003 resistance level before entering overbought territory.