AUD to USD Forecast: Aussie Retail Sales and RBA Rate Path Uncertainties

Wednesday Overview of the AUD/USD

The AUD/USD slid by 0.73% on Wednesday. Reversing a 0.05% gain from Tuesday, the Australian dollar ended the session at $0.64956. The Australian dollar rose to a high of $0.65494 before falling to a low of $0.64884.

Impact of Australian Retail Sales on RBA Monetary Policy

On Thursday, Australian retail sales will put the RBA under the spotlight. Economists forecast retail sales to increase by 1.5% in January after sliding by 2.7% in December.

Household spending and inflation are the focal points for the RBA vis-à-vis monetary policy. During the RBA Press Conference on February 6, RBA Governor Michele Bullock discussed the importance of taming inflation. The RBA Rate Statement highlighted uncertainty about household consumption.

An upward trend in consumer spending could fuel demand-driven inflation and leave an RBA rate hike on the table. A more hawkish RBA rate path could impact borrowing costs and reduce disposable income. Downward trends in disposable income may affect consumer spending and dampen demand-driven inflation.

Beyond the numbers, China remains a consideration as investors look ahead to the gathering in Beijing.

US Economic Calendar: US Inflation and the Fed Under the Spotlight

On Thursday, US inflation and Fed speakers will garner investor interest. Economists forecast the US Core PCE Price Index to increase by 2.8% year-on-year in January. The Core PCE Price Index rose by 2.9% year-on-year in December. Hotter-than-expected inflation figures could sink bets on an H1 2024 Fed rate cut.

However, investors must also consider personal income and spending numbers. Economists forecast personal income and spending to increase by 0.4% and 0.2%, respectively. Upward personal income and spending trends could fuel consumer spending and demand-driven inflation.

Other stats include initial jobless claims, the Chicago PMI, and pending home sales. The reports will likely play second fiddle to the US Personal Income and Outlays Report.

However, investors must consider FOMC member speeches. FOMC members Raphael Bostic, Austan Goolsbee, Loretta Mester, and Fed Vice Chair John Williams are on the calendar to speak. Reaction to the inflation figures and views on the timeline for a Fed rate cut would move the dial.

Short-Term Forecast

Short-term AUD/USD trends will likely hinge on Australian retail sales and the US Personal Income and Outlays Report. Hotter-than-expected US inflation figures could cut bets on an H1 2024 Fed rate cut and pressure the AUD/USD.

AUD/USD Price Action

Daily Chart

The AUD/USD remained below the 50-day and 200-day EMAs, affirming bearish price signals.

An Aussie dollar return to the $0.65 handle would support a move toward the 50-day EMA. A break above the 50-day EMA would bring the 200-day EMA and the $0.66162 resistance level into view.

Australian retail sales, China stimulus chatter, US inflation, and Fed speakers need consideration.

However, a break below the $0.64900 support level could signal a fall toward the trend line and the $0.63853 support level.

A 14-period Daily RSI reading of 39.85 indicates an AUD/USD fall to the trend line before entering oversold territory.

4-Hourly Chart

The AUD/USD hovered below the 50-day and 200-day EMAs, confirming the bearish price trends.

An AUD/USD move to the $0.65 handle would give the bulls a run at the 50-day and 200-day EMAs. A break above the EMAs would bring the $0.66162 resistance level into play.

However, a drop below the $0.64900 support level would give the bears a run at the trend line and the $0.63853 support level.

The 14-period 4-Hourly RSI at 32.46 indicates an AUD/USD break below the $0.64900 support level before entering oversold territory.