Australian Dollar Forecast: Outlook Bullish on Housing Credit and China PMI Forecasts

Australian Housing Credit in Focus

On Monday, September 30, housing sector-related data could impact AUD/USD demand. Economists forecast housing credit to rise by 0.5% in August, mirroring July’s increase.

Rising housing sector credit could support upward house price trends, possibly driving consumer confidence. Improving consumer confidence could fuel spending and demand-driven inflation. A higher inflation outlook may reduce investor bets on a Q4 2024 RBA rate cut.

Additionally, rising house prices could push rents higher, contributing to housing services inflation. Rents remain a focal point for the RBA, given its effects on inflation.

Expert Views on the RBA Rate Path

The Monthly CPI Indicator fell within the RBA’s 2-3% target range in August. AMP’s Head of Investment Strategy and Chief Economist, Shane Oliver, commented,

“Our base case remains for a first RBA cut in Feb (after Q3 & Q4 CPIs confirm falling inflation, but the chance of an earlier move is high.”

China Private Sector PMIs to Influence Aussie Dollar Demand

Meanwhile, China’s private sector PMIs also require consideration. The Caixin Manufacturing PMI will likely impact buyer demand for the Aussie dollar more. Economists forecast the Caixin Manufacturing PMI to increase modestly from 50.4 in August to 50.5 in September.

A higher-than-expected PMI could signal an improving demand environment, possibly boosting the Aussie dollar. China accounts for one-third of Australian exports. With a trade-to-GDP ratio of over 50%, increasing demand from China could improve trade terms, supporting the Aussie economy.

US Economic Calendar: Fed Chair Powell in the Spotlight

Later in the Monday session, Fed Chair Powell is on the calendar to speak. Powell’s reaction to Friday’s Personal Income and Outlays Report and insights into the Fed’s interest rate plans will influence US dollar demand. Support for a 50-basis point rate cut in November and another in December may push the AUD/USD toward $0.70.

Powell’s comments will likely have more influence on the US dollar than Monday’s US economic data. Economists expect modest increases in the Chicago PMI and Dallas Fed Manufacturing Index.

Short-Term Forecast for AUD/USD

Near-term AUD/USD trends could depend on China’s policy maneuvers, Aussie data, and the US labor market stats. Further policy easing from Beijing and upbeat Aussie data could reduce expectations of a Q4 2024 RBA rate cut.

Conversely, softer US labor market data and support for a 50-basis point November Fed rate cut could narrow the interest rate differential between the US and Australia, potentially pushing the AUD/USD toward $0.70.

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

AUD/USD Technical Analysis

Daily Chart and the AUD/USD Breakout

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

A return to the September 27 high of $0.69368 could support 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 and economic data from China, which may influence AUD/USD price movements.

Conversely, a fall through $0.68500 could signal a drop toward the $0.68006 support level. A break below the $0.68006 support level could give the bears a run at the $0.67500 level.

With a 14-period Daily RSI reading of 65.13, the Aussie dollar could return to $0.6938 before entering overbought territory.