Australian Dollar Weekly Forecast: China PMIs, the US Jobs Report, and $0.70

Weekly Overview

In the week ending September 27, the AUD/USD rallied 1.38%, closing the week at $0.68979. The AUD/USD pair dipped to a Monday low of $0.67938 before surging to a Friday high of $0.69368.

Australian Housing Sector Credit in Focus

On Monday, September 30, housing sector credit will require consideration. Economists expect housing credit to increase by 0.5% in August, following a rise of 0.5% in July. Weaker-than-expected figures could signal softer demand, possibly impacting house prices. Downward trends in house prices may affect consumer confidence, potentially dampening spending and inflation.

Retail Sales and the RBA Rate Path

Aussie retail sales will draw investor interest on Tuesday, October 1. Economists forecast retail sales to increase by 0.4% in August after stalling in July. Higher-than-expected retail sales could reduce investor expectations of a Q4 2024 RBA rate cut. Rising retail sales could fuel demand-driven inflation, possibly leading to a higher-for-longer RBA rate path.

Aussie Trade Terms and Demand

On Thursday, October 3, Aussie trade data will influence Aussie dollar demand. Rising imports and exports may signal stronger demand, supporting the Aussie economy. Australia has a trade-to-GDP ratio of over 50%, with 20% of its workforce in trade-related jobs, highlighting the significance of trade terms.

Other stats include finalized PMI numbers, Ai Group Industry data, and building permits. However, these will likely play second fiddle to the retail sales and trade data.

Expert Views on the RBA Rate Path

AMP Head of Investment Strategy and Chief Economist Shane Oliver commented on the chances of a Q4 2024 RBA rate cut, stating,

“Weekly economic & market update – rate cuts + China pivot to “whatever it takes” = big positive for shares; lower oil prices and petrol prices; falling underlying inflation in Aust = RBA could cut by yr end; negative gearing is not the big issue but..”

China’s Private Sector Under the Spotlight

Meanwhile, economic indicators from China will also impact buyer demand for the Aussie dollar. On Monday, NBS and Caixin private sector PMIs will spotlight the Chinese economy. While the NBS PMIs will draw interest, the Caixin PMIs will likely influence sentiment toward China’s economy more.

Economists predict the Caixin Manufacturing PMI will increase from 50.4 in August to 50.5 in September. Furthermore, economists forecast the Caixin Services PMI to drop slightly from 51.6 to 51.5.

Better-than-expected PMI numbers may indicate improving demand, possibly boosting the Aussie economy and the Aussie dollar. China accounts for one-third of Aussie exports, emphasizing the significance of demand from China for the Aussie economy. Conversely, weaker-than-expected PMIs could fuel speculation about further stimulus measures from Beijing to support China’s economy.

Upbeat PMIs could push the AUD/USD toward $0.70. However, weak data could drag the AUD/USD toward $0.68500.

US Economic Calendar: Labor Market Data Crucial for the Fed

On Tuesday, JOLTs Job Openings will be in focus. Economists expect job openings to fall from 7.673 million in July to 7.650 million in August. A larger-than-expected fall may reignite fears of a hard US economic landing, impacting US dollar demand. Conversely, an unexpected rise in job openings could fuel US dollar demand on bets of a less dovish Fed rate path.

ADP employment figures will also require investor consideration on Wednesday. The US labor market remains the main focal point for the Fed, which is attempting to navigate a soft landing. Economists expect the ADP to report a 110k increase in employment in September, up from 99k in August.

On Thursday, ISM Services PMI will influence expectations of a soft landing. Economists predict the ISM Services PMI will remain steady at 51.5 in September. A higher-than-expected PMI could signal a robust US economy and the need for a less dovish Fed rate path.

On Friday, the US Jobs Report could dictate the Fed’s rate path through Q4 2024. Economists expect the US unemployment rate to hold at 4.2% in September and nonfarm payrolls to rise by 145k. A weaker labor market could retrigger fears of a hard landing, possibly raising expectations of a more dovish Fed rate path to support the US economy.

Rising bets on multiple Q4 2024 Fed rate cuts could push the AUD/USD toward $0.70. Conversely, a tighter-than-expected US labor market may pull the AUD/USD toward $0.67500.

Beyond the numbers, Fed speakers will move the dial. Notably, Fed Chair Powell is on the calendar to speak on Monday.

Short-Term Forecast:

The near-term trend for the AUD/USD will hinge on central bank chatter, PMIs from China, and the US economic calendar. Softer US Services PMI and labor market data could tilt monetary policy divergence toward the Aussie dollar. Expectations of a narrower interest rate differential may push the AUD/USD toward $0.70.

Investors should remain vigilant. Economic indicators from China, Australia, and the US will be crucial for the AUD/USD pairing. Stay informed with our latest updates and insights to navigate the Forex markets effectively.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar return to the September 27 high of $0.69368 would support a move toward $0.69500. Furthermore, a breakout from $0.69500 may bring the $0.70 level into play.

Central bank commentary and economic indicators from Australia, China, and the US require consideration.

Conversely, an AUD/USD drop below $0.68500 could give the bears a run at the $0.68006 support level. A fall through the $0.68006 support level may signal a drop toward the $0.67500 level.

With a 14-period Daily RSI reading of 65.13, the AUD/USD may climb to $0.69500 before entering overbought territory.