Australian Dollar Forecast: Can China Stimulus Boost AUD/USD Toward 0.68?

Can China’s Policy Measures Boost the Aussie Dollar

The AUD/USD ended a five-day losing streak on Thursday, October 10, with the focus now turning to China. The People’s Bank of China and the Chinese government appear ready to deliver more policy measures that will aim to achieve their 2024 growth target of 5%.

On Thursday, the PBoC set up a 500 billion Yuan Security, Funds, and Insurance Companies Swap Facility (SFISF) to give liquidity to equity-holding financial institutions. The SFISF will likely have more influence on Mainland China’s equity markets than on the AUD/USD. However, Thursday’s maneuver showed that more policy measures are on the horizon.

Economists expect the Chinese government to roll out fresh stimulus measures on October 12. This could be the bazooka the markets have been clamoring for.

Boosting demand from China could benefit the Aussie economy as China accounts for one-third of Australian exports. Furthermore, Australia has a trade-to-GDP ratio of over 50%, with 20% of its workforce in trade-related jobs. A convincing stimulus package could rekindle the Aussie dollar’s move toward $0.70.

Expert Views on China’s Stimulus Plays

Natixis Asia economist Alicia Garcia Herrero recently remarked on China’s policy maneuvers, stating,

“The market really expected more. The correction will be even stronger if the data on the Golden Week in terms of consumption is weak. The market is reacting to the lack of a real fiscal stimulus.”

Referring to this week’s National Development and Reform Commission (NDRC) press conference, she added,

“I would not have organized a press conference not to announce anything new.”

US Producer Prices and Consumer Sentiment to Test US Dollar Demand

On the US front, economic indicators will continue influencing AUD/USD trends. Later in the Friday session, producer prices and consumer sentiment figures will impact US dollar demand.

Economists expect producer prices to increase by 1.6% year-on-year in September, following a rise of 1.7% in August. Softer-than-expected figures could signal a decline in consumer prices. Producers tend to lower prices as demand weakens, passing savings on to consumers. The US dollar may be more sensitive to the data following Thursday’s CPI Report.

Conversely, higher producer prices or an increase in consumer sentiment could push the AUD/USD toward $0.67.

Short-Term Forecast for AUD/USD

Near-term AUD/USD trends will likely hinge on policy updates from Beijing and US economic data. Nevertheless, higher producer prices and improving consumer sentiment will likely impact the AUD/USD more.

Investors should closely monitor central bank signals and economic indicators, which could influence AUD/USD trends. Beyond the economic calendar, news updates on the Middle East conflict also need monitoring. Risk aversion could trigger a flight to safety, affecting demand for commodity currencies, including the Aussie dollar.

AUD/USD Technical Analysis

Daily Chart: AUD/USD Breakout Intact

The AUD/USD hovers below the 50-day EMA while remaining above the 200-day EMA, confirming bearish near-term but bullish longer-term price trends.

A break above the 50-day EMA could support a move toward the $0.68006 resistance level. Furthermore, a breakout from the $0.68006 resistance level may give the bulls a run at the $0.68500 level.

Traders should consider the central bank commentary and the US data, which may influence AUD/USD price movements.

Conversely, an AUD/USD fall through the $0.67050 support level could indicate a drop to the 200-day EMA.

With a 14-period Daily RSI reading of 44.66, the Aussie dollar may fall to the 200-day EMA before entering oversold territory.