AUD to USD Forecast: Retail Sales and RBA Moves in the Spotlight

Australian Retail Sales and the RBA

On Tuesday (May 7), finalized retail sales figures will influence buyer appetite for the AUD/USD. According to the preliminary report, retail sales declined by 0.2% in March after rising by 0.2% in February. Upward revisions to retail sales would fuel speculation about a more hawkish RBA rate path.

Consumer spending fuels demand-driven inflationary pressures. After the recent inflation figures, the RBA could take a more hawkish monetary policy stance to raise borrowing costs and reduce disposable income. Downward trends in disposable income could force consumers to curb spending on non-essential items.

While the retail sales figures warrant investor attention, the RBA monetary policy decision and press conference will be the focal points.

Discussions about persistent inflation and the possible need for a rate hike could drive buyer demand for the Aussie dollar.

US Economic Calendar: Fed Speakers in Focus

Later in the Tuesday session, the RCM/TIPP Economic Optimism Index will garner investor interest. Economists forecast the Index to increase from 43.2 to 44.1 in May.

Recent labor market and services sector figures raised investor expectations of a September Fed rate cut. Upward trends in optimism toward the US economy could support bets on the US avoiding an economic recession. However, the numbers are unlikely to influence the Fed rate path.

Beyond the numbers, Fed speakers need investor consideration. Views on inflation, the economic outlook, and the timing of a Fed rate cut could move the dial. FOMC member Neel Kashkari is on the calendar to speak.

Short-Term Forecast

Near-term AUD/USD trends will hinge on the RBA interest rate decision and RBA press conference. After hotter-than-expected Australian inflation numbers, a more hawkish RBA monetary policy stance could tilt monetary policy divergence toward the Aussie dollar.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar break above the $0.66500 handle could give the bulls a run at the $0.67003 resistance level.

Investors should consider the retail sales figures and the RBA press conference during the Asian session.

Conversely, an AUD/USD drop below the $0.66 handle would bring the $0.65760 support level and the 200-day EMA into play. A fall through the 200-day EMA could signal a drop to the 50-day EMA.

With a 14-period Daily RSI reading of 61.13, the AUD/USD could break above the $0.67003 resistance level before entering overbought territory.