Australian Dollar Forecast: AUD/USD Set for Volatility as the Fed Decision Looms

RBA Rhetoric to Spotlight the Aussie Dollar

On Wednesday, September 18, RBA rhetoric could impact buyer demand for the AUD/USD pair.

RBA Assistant Governor Brad Jones is on the Australian Economic Calendar to speak. His views on the timing of an RBA interest rate cut require investor consideration.

Recent inflation figures from Australia have fueled speculation about a possible Q4 2024 RBA rate cut. This marks a shift from earlier expectations of an RBA rate hike because of sticky inflation.

Now, softer inflation numbers and weaker economic indicators from China have raised expectations of a Q4 2024 RBA rate cut.

Weakening demand from China may impact the Australian economy as one-third of Australian exports go to China. Additionally, with trade contributing over 50% to GDP and 20% of the Australian workforce in trade-related jobs, weaker demand could pressure the RBA to cut rates.

RBA support for a Q4 2024 RBA rate cut could drag the AUD/USD to $0.67.

Expert Views on the RBA Rate Path

AMP Head of Investment Strategy and Chief Economist Shane Oliver recently remarked on the RBA rate path, stating,

“The resumption of share mkt weakness along with falling commodity prices & bond ylds is signaling concerns about the global economy the RBA can’t ignore. Just as the Fed has changed its tune significantly over the last few mths there is a high probability the RBA will do the same so the Australian money market’s continued pricing in of a rate cut by year-end – a 0.25% rate cut is priced in with a 92% probability – may not be that outlandish, despite recent RBA guidance.”

The US Fed: 20 or 50 Basis Points?

Later on Wednesday, attention will turn to the FOMC interest rate decision, economic projections, and press conference. While the consensus is for a 25-basis point Fed rate cut, the CME FedWatch Tool shows a 64% chance of a 50-basis point rate cut.

A 25-basis point Fed rate cut and optimism for a soft US economic landing could drag the AUD/USD below $0.67. Conversely, a 50-basis point Fed rate cut amid fears of a hard landing could push the AUD/USD above $0.68.

Short-Term Forecast for AUD/USD

Near-term AUD/USD trends will likely hinge on the Fed interest rate decision, economic projections, and press conference. If the Fed cuts rates by 50-basis points and warns about a hard landing, the AUD/USD could break above $0.68. However, investors should also consider Aussie labor market data on Thursday, which may influence the RBA rate path.

Investors should monitor central bank communications closely, which will impact AUD/USD trends.

AUD/USD Technical Analysis

Daily Chart

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

A break above the Tuesday, September 17 high of $0.67687 could support a move toward the $0.68006 resistance level. Furthermore, a breakout from the $0.68006 resistance level may bring the $0.70 level into view.

RBA commentary, the FOMC interest rate decision, FOMC projections, and the FOMC press conference require consideration.

Conversely, a drop below the $0.67500 level could signal a fall toward the $0.67050 support level. A fall through the $0.67050 support level would bring the 50-day EMA into play.

With a 14-period Daily RSI reading of 57.49, the Aussie dollar may climb to the $0.68006 resistance level before entering overbought territory.