AUD/USD Daily Forecast: CAPEX, Inflation, and RBA Rate Path Outlook

Private CAPEX: Key Driver for AUD/USD Movements?

Australian private capital expenditure (CAPEX) data may influence the AUD/USD pair on Thursday, August 29.

Economists expect private CAPEX to increase by 1% quarter-on-quarter in Q2 2024 after a 1% rise in Q1 2024.

Stable private capital expenditure could allow investors to focus on other key economic indicators, including the labor market, inflation, and private consumption. Conversely, weaker CAPEX figures could signal a deteriorating macroeconomic backdrop as private CAPEX contributes 10-15% to GDP.

Investors should also consider trends in the mining and construction sectors. Downward trends in mining private CAPEX, especially non-dwelling and plant and machinery CAPEX, may suggest a downtrend in demand, possibly affecting exports and the labor market.

The data requires consideration as Australia has a trade-to-GDP ratio of over 50%, with 20% of its workforce in trade-related jobs.

In Q1 2024, the Australian economy grew by 0.1% quarter-on-quarter. While private CAPEX in machinery and equipment increased by 3.3% quarter-on-quarter, the mining sector saw a 4.7% decline.

Expert Views on Inflation and the RBA Rate Path

While the private CAPEX figures will give investors insights into the demand environment, inflation trends remain crucial.

AMP Head of Investment Strategy and Chief Economist Shane Oliver commented on Wednesday’s Monthly CPI Indicator, stating,

“Aust July CPI 0%m/3.5%y helped by electricity rebates with trimmed mean falling to 3.8%y. Both a bit > exp but roughly consistent with RBA Q3 forecasts (2.9%yoy CPI, 3.6% trim mean). Unlikely to change the RBAs assessment, so we stick to first cut being in Feb for now.”

The Australian Monthly CPI Indicator fell from 3.8% in June to 3.5% in July.

US Economic Calendar

Later in the session on Thursday, the second estimate of GDP, pending home sales, and jobless claims data will require investor attention. Unless there is a significant revision to the GDP estimate, the jobless claims will impact the AUD/USD more, especially as scrutiny of the labor market intensifies.

Economists predict initial jobless claims to remain steady at 232k in the week ending August 24. However, an unexpected spike in initial jobless claims, possibly above 250k, could retrigger fears of a US recession. Moreover, weaker labor market conditions may fuel speculation of a 50-basis point September Fed rate cut.

FOMC Member Views on Inflation

Beyond the numbers, investors should monitor comments from the Fed. Their views on inflation, the labor market, and the Fed rate path may influence bets on a 50-basis point September rate cut.

On Wednesday, FOMC voting member Raphael Bostic downplayed the chances of a September Fed rate hike, saying there was still some distance to go on inflation.

Short-Term Forecast: Bullish

Near-term AUD/USD trends will hinge on the US jobless claims (Thurs), Aussie retail sales (Fri), and the US Personal Income and Outlays Report (Fri).

Softer-than-expected Australian retail sales could dampen expectations of an RBA rate hike. However, higher US jobless claims, a drop in personal spending, and softer US inflation could raise expectations of a 50-basis point Fed rate cut, possibly pushing the AUD/USD toward $0.70.

Investors should stay alert to economic data and central bank commentary that may influence AUD/USD price trends. 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 hovered well above the 50-day and 200-day EMAs, confirming the bullish price trend.

A break above the $0.67967 resistance level would support a move toward the $0.68500. Furthermore, a breakout from $0.68500 may give the bulls a run at the $0.68996 resistance level. The AUD/USD last tested the $0.68996 resistance level in mid-July.

Investors should consider the Aussie private CAPEX figures, US jobless claims, and central bank comments.

Conversely, a drop below $0.67500 could bring the $0.67003 support level into play. A fall through the $0.67003 support level may signal a fall toward the 50-day EMA.

With a 14-period Daily RSI reading of 64.90, the Aussie dollar could break above the $0.67967 resistance before entering overbought territory.