AUD/USD Daily Forecast: Retail Sales and US PCE Index Set to Drive Market Sentiment

Aussie Retail Sales Crucial for Inflation Trends

On Friday, August 30, Australian retail sales will put the AUD/USD and the RBA in the spotlight.

Economists forecast retail sales will increase by 0.3% in July after an increase of 0.5% in June.

Higher-than-expected retail sales could reignite speculation about a Q4 2024 RBA rate hike. Upward trends in retail sales could fuel demand-driven inflation, raising the possibility of a more hawkish RBA rate path. Higher interest rates may increase borrowing costs, lowering disposable income and curbing consumer spending.

Better-than-expected retail sales figures could push the AUD/USD toward $0.68500.

Consumer Spending, Inflation, and RBA Warnings

While Wednesday’s Monthly CPI Indicator signaled softer inflation, a pickup in consumer spending may cause the RBA to maintain its hawkish policy stance.

RBA Governor Michele Bullock recently warned the RBA would not hesitate to raise interest rates if inflation does not soften.

Expert Views on Aussie Inflation

Tony Sycamore, Market Analyst at IG, commented on Wednesday’s inflation report, stating,

“The Monthly CPI indicator rose by 3.5% YoY in July, easing from 3.8% in June and above consensus expectations of 3.4%. The ex-volatile measure eased to 3.7% in July from 4.0% in June. Annual trimmed mean inflation eased to 3.8% YoY from 4.1% in June. At the margin on the firmer side of things compared to expectations.”

The Australian Monthly CPI Indicator fell from 3.8% in June to 3.5% in July but remained above the RBA’s target range (2%-3%).

US Economic Calendar

Later in the session on Friday, the highly anticipated Personal Income and Outlays Report will influence US dollar demand.

Economists expect the Core PCE Price Index to increase from 2.6% in June year-on-year to 2.7% in July. Higher-than-expected inflation could dampen investor expectations of multiple 2024 Fed rate cuts.

Beyond inflation, personal income and spending trends are also crucial. Downward trends in personal income may reduce disposable income, dampening consumer spending and inflation. Furthermore, weaker personal spending might also signal a softer inflation outlook, possibly countering any short-term effects of higher inflation numbers on the Fed rate path.

Economists predict personal income and spending will increase by 0.2% (June: +0.2%) and 0.5% (June: +0.3%) in July, respectively.

Expert Views on the Fed Rate Path

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, remarked on the overnight US data, stating,

“US Q2 GDP revised up to 3% annualised from 2.8% w stronger consumption. Core PCE revised to 2.8% annualised from 2.9% Initial jobless claims -2k, continuing +13k July pending home sales -5.5%mom Data leaning to 0.25% Sep Fed cut rather than 0.5%”

Short-Term Forecast: Bullish

Near-term AUD/USD trends will hinge on the Aussie retail sales and the US Personal Income and Outlays Report (Fri). Lower-than-expected Australian retail sales could reduce expectations of an RBA rate hike. However, softer inflation and a decline in personal spending could fuel bets on a 50-basis point Fed rate cut in September, 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 remained comfortably above the 50-day and 200-day EMAs, affirming the bullish price trend.

A return to $0.68500 could support a move toward the $0.68996 resistance level. Furthermore, a break above the $0.68996 resistance level could give the bulls a run at $0.70. The AUD/USD last visited $0.70 in February 2023.

Investors should consider the Aussie retail sales, the US Personal Income and Outlays Report, and central bank comments.

Conversely, a break below the $0.67967 support level may indicate a drop to $0.67500, possibly bringing the $0.67003 support level into play.

With a 14-period Daily RSI reading of 66.33, the Aussie dollar could return to $0.68500 before entering overbought territory.