AUD to USD Forecast: Building Permits and China Trade to Drive Aussie Dynamics

Aussie Housing Sector and China Trade Terms Under the Spotlight

On Thursday (May 9), finalized Australian building permit figures for March will put the AUD/USD in focus. According to preliminary numbers, building permits increased by 1.9% in March after falling by 0.9% in February.

On Tuesday, RBA Governor Michele Bullock discussed the tightness of the Australian property market and the impact on rents. Increased supply could cool the property market and lower rents.

Downward rent trends could soften service sector inflation and ease pressure on households. Significantly, reduced rents could increase disposable income and fuel household spending to support the economy.

While the building permit figures will draw interest, trade data from China will likely impact the AUD/USD more.

Economists forecast exports to increase 1.0% year-on-year in April, with imports to rise 5.4%. Exports were down 7.5% in March, while imports declined by 1.9%. Better-than-expected figures could signal an improving demand environment, a positive for the Australian economy and the Aussie dollar.

China accounts for one-third of Australian exports. Moreover, Australia has a trade-to-GDP ratio above 50%, with 20% of the Australian workforce in trade-related jobs. Better trade terms could drive buyer demand for Aussie raw materials and goods.

US Economic Calendar: Jobless Claims and The Fed in Focus

Later in the Thursday session, US labor market data will attract investor attention, with jobless claims in focus.

Economists forecast initial jobless claims to increase from 208k to 210k in the week ending May 4. Investors could be more sensitive to the figures following the weaker-than-expected US Jobs Report. An unexpected spike in jobless claims could raise investor bets on a September Fed rate cut. However, jobless claims may need to rise above 220k to move the dial.

A deteriorating labor market could impact wage growth and reduce disposable income. A fall in disposable income could force consumers to curb spending and dampen demand-driven inflation. A softer inflation environment could allow the Fed to discuss interest rate cuts.

Beyond the numbers, FOMC member commentary also needs consideration. FOMC member Mary Daly is on the calendar to speak. Views on the economy, inflation, and the Fed rate path could move the dial.

Short-Term Forecast

Near-term AUD/USD trends will likely depend on trade data from China and FOMC member speeches. More hawkish Fed chatter could tilt monetary policy divergence toward the US dollar. However, the US CPI Report and Aussie labor market data could be pivotal for the AUD/USD. The reports are out next week.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar move to the $0.66 handle would support a return to the $0.66500 handle. A breakout from $0.66500 could give the bulls a run at the $0.67003 resistance level.

Trade data from China, US jobless claims, and FOMC member commentary need consideration.

Conversely, an AUD/USD fall through the $0.65760 support level and the 200-day EMA could signal a drop to the 50-day EMA. A break below the 50-day EMA would bring sub-$0.65 into play.

With a 14-period Daily RSI reading of 55.32, the AUD/USD could rise to the $0.67003 resistance level before entering overbought territory.