AUD to USD Forecast: Aussie Retails and Profit Drop May Test RBA Inflation Fight

Australian Company Gross Profits and Retail Sales in Focus

On Tuesday (June 4), Australian economic indicators could influence the RBA interest rate trajectory. Company gross profits and finalized retail sales numbers warrant investor attention.

Economists forecast company gross profits to fall by 0.9% in Q1 2024 after surging 7.4% in Q4 2023.

A larger-than-expected decline in company gross profits could signal a deteriorating macroeconomic environment.

Falling profits could force firms to cut costs, including reducing staffing levels, to manage business conditions. Weaker labor market conditions could affect wage growth and reduce disposable income. Downward trends in disposable income could reduce consumer spending, potentially dampening demand-driven inflation.

Additionally, retail sales numbers could also signal near-term consumer price trends. According to the preliminary retail sales report, retail sales increased by 0.1% in April after falling by 0.4% in March. A downward revision to retail sales could signal a softer inflation outlook.

Other stats include current account, business inventories, and net export contributions to the economy. Net export contributions could give investors an early clue on likely Australian growth numbers for the first quarter. Q1 2024 GDP numbers will be in focus on Wednesday (June 5).

US Economic Calendar: JOLTs Job Openings and Quit Rates

Later in the Tuesday session, the US labor market will be in focus, with the JOLTs Job Openings Report in the spotlight.

Economists forecast job openings to fall from 8.488 million to 8.350 million in April. Furthermore, economists expect job quits to decline from 3.329 million to 3.200 million.

A larger-than-forecast fall in job openings could signal a softer labor market environment. Weaker labor market conditions could affect consumer confidence, wage growth, and disposable income. The net effect may be a fall in consumer spending, dampening demand-driven inflation.

However, investors should also consider job quit numbers. Workers are less likely to leave their jobs in a deteriorating labor market environment. Downward trends in job quits would signal uncertainty about the labor market.

Significantly weaker labor market conditions may prompt the Fed to adopt a less hawkish stance on interest rates.

Short-Term Forecast

Near-term AUD/USD trends will likely hinge on Aussie GDP numbers, US Services PMI numbers, and the US Jobs Report. Better-than-expected US service sector activity and labor market conditions could reduce investor expectations for a September Fed rate cut. Monetary policy divergence would remain in favor of the US dollar.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar break above the $0.67003 resistance level could signal a return to the $0.67500 handle.

Aussie retail sales, company gross profits, and US labor market data need consideration.

Conversely, an AUD/USD fall through the $0.66500 handle could give the bears a run at the 50-day EMA. A fall through the 50-day EMA could signal a drop to the 200-day EMA and the $0.65760 support level. Buyer appetite may intensify at the $0.65760 support level. The 200-day EMA is confluent with the support level.

With a 14-period Daily RSI reading of 60.70, the AUD/USD could climb to the $0.67500 handle before entering overbought territory.