AUD to USD Forecast: Aussie Soars 0.83%, Eyes Employment Figures and US Services PMI

Wednesday Overview of the AUD/USD

The AUD/USD rallied 0.83% on Wednesday. Reversing a 0.41% loss from Tuesday, the Australian dollar ended the session at $0.65863. The Australian dollar fell to a low of $0.65116 before rising to a high of $0.65870.

Private Sector PMIs and the Labor Market in Focus

On Thursday, preliminary private-sector PMI numbers for March garnered investor interest early in the Asian session.

The Judo Bank Manufacturing PMI fell from 47.8 to 46.8, while the Services PMI increased from 53.1 to 53.5. Economists forecast PMIs of 48.9 and 51.5, respectively. The Judo Bank Services PMI had more weightage, accounting for over 60% of the Australian economy. Notably, input and output prices across the services sector increased at a less marked pace.

Later this morning, employment figures for February also need consideration. Despite a less hawkish RBA stance on monetary policy, tighter labor market conditions could change the narrative.

Tighter labor market conditions could support wage growth, increasing disposable income. Upward trends in disposable income may fuel consumer spending and demand-driven inflation. A higher-for-longer RBA rate path could impact borrowing costs, reduce disposable income, and curb spending.

Economists forecast the Australian unemployment rate to fall from 4.1% to 4.0%.

US Economic Calendar: Manufacturing, Services, and Labor Market Events

On Thursday, the S&P Global Services PMI and jobless claims warrant investor attention.

A pickup in US services sector activity could influence the timeline for a Fed rate cut. The services sector accounts for over 70% of the US economy, giving the Services PMI more weightage than the Manufacturing PMI.

Economists forecast the S&P Global Services PMI to fall from 52.3 to 52.0. However, investors must consider the sub-components, including prices, new orders, and employment.

An unexpected pickup in services sector activity and upward trends in the sub-components could reduce bets on a June Fed rate cut.

Investors must also consider the weekly jobless claims. Tight labor market conditions support wage growth and disposable income. Economists forecast initial jobless claims to increase from 209k to 215k in the week ending Mar 16.

Other stats include the Philly Fed Manufacturing Index and existing home sales. However, the numbers could play second fiddle to the service sector and labor market data.

Beyond the numbers, FOMC member Michael Barr is on the calendar to speak. Views on the inflation outlook and timeline for a Fed rate cut need monitoring.

Short-Term Forecast

Near-term AUD/USD trends will hinge on labor market data from Australia and the US services PMI. Tighter labor market conditions in Australia and a softer US Services PMI could tilt monetary policy divergence toward the Aussie dollar. Despite a less hawkish RBA press conference, the RBA remains willing to hike rates.

AUD/USD Price Action

Daily Chart

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

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

Australian and US labor market data and the US services PMI need consideration.

Conversely, an AUD/USD drop below the 200-day EMA would bring the $0.65760 support level and 50-day EMA into play. A fall through the 50-day EMA could signal a drop toward the $0.64582 support level.

Considering the RSI indicator, a 14-period Daily RSI reading of 54.01 indicates an AUD/USD move to the $0.67003 resistance level before entering overbought territory.