Australian Dollar Forecast: Will PBoC Surprise Boost AUD/USD Towards $0.68?

People’s Bank of China in the Spotlight

The People’s Bank of China (PBoC) could impact AUD/USD trends on Tuesday, October 15. Economists expect the PBoC to maintain the 1-year Medium-Term Lending Facility Rate (MLF) at 2.0%.

However, an unexpected cut to the 1-year MLF could support borrowing, possibly boosting demand in China. Stronger Chinese demand could benefit the Aussie economy as one-third of exports go to China.

With Australia’s trade-to-GDP ratio of over 50% and 20% of its workforce in trade-related jobs, increasing demand may reduce bets on a Q4 2024 RBA rate cut. A less dovish RBA rate path could drive Aussie dollar demand, potentially pushing the AUD/USD toward $0.68.

Impact of Chinese Fiscal Policy

On Saturday, October 12, China’s Ministry of Finance held back fiscal stimulus measures targeting demand, pressuring the AUD/USD lower on Monday, October 14. However, economists expect a third round of stimulus measures in October. The Chinese government could deliver policies to fuel private consumption, potentially easing deflationary pressures and supporting the Aussie dollar.

Expert Views on Beijing’s Stimulus and China’s Economic Outlook

On Monday, October 14, CN Wire shared comments from China’s state-owned rating agency, stating,

“China’s state-owned rating company Golden Credit Rating expects the incremental size of the latest fiscal policy will be no less than 4 trillion Yuan ($563.3 billion), directly pushing the 4Q GDP growth to above 5.0%.”

US Economic Calendar: Inflation and Manufacturing in Focus

Shifting focus to the US inflation landscape, consumer inflation expectations will draw investor interest.

Economists forecast consumer inflation expectations to slip from 3.0% in August to 2.9% in September. A larger-than-expected decline could raise expectations of multiple Q4 2024 Fed rate cuts. Consumers delay purchases if consumer prices are falling, dampening demand-driven inflation.

Following last week’s US inflation figures, a sharper fall in inflation expectations could push the AUD/USD toward $0.68. Conversely, an unexpected increase could affect the Fed rate path, potentially driving the AUD/USD below $0.67.

Other US economic indicators include the NY Empire State Manufacturing Index. However, barring a drop into negative territory, the inflation figures could influence US dollar demand more.

Short-Term Forecast for AUD/USD

Near-term AUD/USD trends will likely depend on fiscal stimulus updates from Beijing, Aussie labor market data, and US economic indicators. Stimulus measures from Beijing targeting consumption and a lower Aussie unemployment rate may reduce expectations of a Q4 RBA rate cut.

However, higher-than-expected US inflation and retail sales may temper bets on multiple Q4 2024 Fed rate cuts and drive US dollar demand.

Investors should follow central bank signals and economic indicators, likely influencing AUD/USD trends. Beyond the economic calendar, news updates from Beijing also require consideration. Further fiscal stimulus could drive 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 give the bulls a run at the $0.68006 resistance level. Furthermore, a breakout from the $0.68006 resistance level may signal a move toward the $0.68500 level.

Traders should consider the PBoC policy decision, US consumer inflation expectations, and central bank commentary, which may influence AUD/USD price movements.

Conversely, an AUD/USD fall through the $0.67050 support level could bring the 200-day EMA into play.

With a 14-period Daily RSI reading of 43.05, the Aussie dollar could drop below the 200-day EMA before entering oversold territory.