Australian Dollar Forecast: Gains Expected as RBA Rate Path and US Data Drive Markets

RBA Financial Stability Review in Focus

On Thursday, September 26, the RBA Financial Stability Review may impact AUD/USD demand. Investors should assess how inflation and interest rates are affecting households and businesses.

During Tuesday’s RBA press conference, RBA Governor Michele Bullock highlighted several key areas of focus for the RBA Board. These included:

• Underlying inflation, fueled by services, vs headline inflation.
• Labor market conditions.
• Household spending.

A weakening labor market may adversely impact household spending and the economy. Rising unemployment could push household debt default rates higher, possibly forcing banks to tighten credit terms, further dampening consumption.

If this occurs, investors could raise expectations of a Q4 2024 RBA rate cut, potentially slowing the AUD/USD move toward $0.70. Currently, the RBA expects a resilient labor market.

In March, the Financial Stability Report revealed that most Australian households could cover essentials and manage their debts. Australian banks were also well-positioned to absorb higher loan losses.

Expert Views on the Australian Economy and RBA Rate Path

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

“Services infl remains too high but will slow with cooling jobs mkt. Our Inflation Indicator points to a further fall. […] Our base case remains for first RBA cut in Feb (after Q3 & Q4 CPIs confirm falling infl, but chance of an earlier move is high.”

US Economic Calendar: Jobless Claims, Durable Goods Orders, and GDP Numbers in Focus

Later on Thursday, weekly jobless claims data could face investor scrutiny.

Economists forecast initial jobless claims to increase from 219k (week ending September 14) to 225k (week ending September 21). Sub-230k levels would likely support expectations of a soft landing. Nevertheless, higher claims may drive bets on multiple Q4 2024 Fed rate cuts, possibly pushing the AUD/USD toward $0.70.

Other US stats include GDP data and Durable Goods Orders. However, barring dire numbers, these will likely play second fiddle to the labor market numbers. Beyond the numbers, Fed Chair Powell is on the calendar to speak.

Short-Term Forecast for AUD/USD

Near-term AUD/USD trends could depend on the RBA Financial Stability Review and US initial jobless claims. Central bank commentary will also influence the AUD/USD pair.

However, barring RBA concerns about Aussie household debt repayments and the labor market, US jobless claims could signal multiple Fed rate cuts. A further narrowing in the interest rate differential between Australia and the US would support an AUD/USD move toward $0.70.

Investors should closely monitor central bank signals and economic indicators, which could influence AUD/USD trends. Monitor the real-time data, news updates, and expert commentary to adjust your trading strategies.

AUD/USD Technical Analysis

Daily Chart and the AUD/USD Breakout

The AUD/USD remains well above the 50-day and 200-day EMAs, confirming bullish price trends.

A return to the September 25 high of $0.69081 could signal a move toward the $0.69500 level. Furthermore, a breakout from $0.69500 could give the bulls a run at $0.70.

Traders should consider central bank commentary, the RBA Financial Stability Review, and US economic indicators, which may influence AUD/USD price movements.

Conversely, a fall through the $0.68006 support level may give the bears a run at $0.67500.

With a 14-period Daily RSI reading of 58.79, the Aussie dollar could return to $0.69081 before entering overbought territory.