AUD/USD Daily Forecast: China Inflation Data to Drive Aussie Dollar Sentiment

China’s Inflation Figures and AUD/USD Impact

On Monday, September 9, inflation figures from China will influence buyer demand for the AUD/USD pair.

Economists expect the annual inflation rate to increase from 0.5% in July to 0.7% in August. An upward trend in consumer price inflation could signal an improving demand environment, possibly boosting the Australian dollar.

China accounts for one-third of Australian exports, with 20% of the Aussie workforce in trade-related jobs. Increased demand from China could boost the Australian economy, which has a trade-to-GDP ratio of over 50%.

Beyond headline inflation, investors should also consider producer price trends. A larger-than-expected decline in producer prices could signal a softer outlook for consumer prices, possibly countering the effects of headline inflation on the Aussie dollar. Producers reduce prices in a weakening demand environment, dampening demand-driven inflationary pressures.

Economists expect producer prices to fall by 1.4% year-on-year in August after declining by 0.8% in July.

Expert Views on China and the Outlook for Monetary Policy

The inflation numbers from China will put the People’s Bank of China under the spotlight. A weak demand outlook could raise expectations of further policy support to bolster the Chinese economy.

Natixis Asia Pacific Chief Economist Alicia Garcia-Herrero remarked on the PBoC’s options, stating,

“The PBoC will have to ease again cutting reserve requirements (RRR). The problem is that the risk of a liquidity trap is only growing. If China ends up there, rate cuts will no longer work.”

US Inflation Expectations and Market Reactions

Later in the Monday session, consumer inflation expectation figures could influence US dollar demand.

Economists forecast consumer inflation expectations to remain steady at 3.0% in August. Softer-than-expected figures could fuel investor bets on a 50-basis point September Fed rate cut. Consumers delay purchases if they expect prices to soften, dampening demand-driven inflationary pressures. Lower-than-expected consumer inflation expectations could push the AUD/USD toward $0.67.

Expert Views on the US Labor and the Fed Rate Path

AMP Head of Investment Strategy and Chief Economist Shane Oliver remarked on the US Jobs Report, stating,

“US Aug payrolls +142k,

Short-Term Forecast: Bullish

Looking ahead, near-term AUD/USD trends will hinge on crucial data releases from China and US inflation numbers. Weaker-than-expected stats from China could signal a waning demand environment, possibly pushing the AUD/USD below $0.66.

Conversely, lower-than-expected US inflation numbers could counter the effects of data from China. Support for a 50-basis-point September Fed rate cut may push the AUD/USD toward $0.67.

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 sat below the 50-day EMA while remaining above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.

A break above the 50-day EMA could signal a move toward the $0.67003 resistance level. Furthermore, a breakout from the $0.67003 resistance level may give the bulls a run at the $0.67500 level.

Investors should consider the inflation numbers from China, the US economic calendar, and central bank commentary.

Conversely, a drop below $0.66500 would bring the top trend line into play. A fall through the top trend line could give the bears a run at the 200-day EMA and sub-$0.66 levels.

With a 14-period Daily RSI reading of 46.53, the Aussie dollar may fall below the 200-day EMA before entering oversold territory.