The AUD/USD rallied 1.01% on Friday, ending the session at $0.66708.
Fed Chair Powell fueled an AUD/USD move toward the $0.67 handle.
Australian economic indicators and US factory orders will be focal points on Monday.
Friday Overview of the AUD/USD
The AUD/USD rallied 1.01% on Friday. After a 0.18% loss on Thursday, the Aussie dollar ended the day at $0.66708. The Aussie dollar fell to a low of $0.65994 before rising to a high of $0.66757.
Australian Economic Calendar in Focus
Australian home loans and company gross profits will garner investor interest on Monday.
An unexpected fall in home loans and a larger-than-expected fall in company gross profits would affect the buyer demand for the AUD/USD. Weak loan demand could signal a deterioration in consumer sentiment. Waning consumer sentiment would impact consumer spending and dampen demand-driven inflation.
Softer demand-driven inflationary pressures would ease the need for a hawkish RBA rate path. Australian private consumption contributes over 50% to the economy. Weak consumption could drive bets on an economic recession.
Economists forecast home loans to increase by 0.8% in October after falling 0.1% in September.
Weaker-than-expected gross company profits could also affect the outlook for consumer spending. Falling profits could force firms to cut costs, including staffing levels. A deteriorating labor market would impact consumer confidence and wage growth.
Beyond the numbers, investors must monitor stimulus chatter from Beijing. A substantial stimulus package could sustain the Aussie dollar move toward $0.67.
US Factory Orders in Focus
On Monday, US factory orders will draw investor interest. A larger-than-expected slide in orders would signal a weakening demand outlook, favoring a less hawkish Fed rate path. The US manufacturing sector accounts for less than 30% of the economy. However, cracks in the US economy would support bets on a Q1 2024 Fed rate cut.
According to the CME FedWatch Tool, the probability of a 25-basis point March Fed rate stood at 51.5% on Friday vs. 21.0% on Friday, November 24. The jump in the chance of a Q1 2024 rate cut reflected the market reaction to Fed Chair Powell’s speech on Friday.
Near-term AUD/USD trends hinge on the RBA (Tues), US services sector stats (Tues), and the US Jobs Report (Fri). A hawkish RBA hold, softer service sector activity, and weaker wage growth would deliver further AUD/USD gains on monetary policy divergence.
AUD/USD Price Action
The AUD/USD remained above the 50-day and 200-day EMAs, affirming bullish price signals.
An AUD/USD return to $0.67 would support a move to the $0.67286 resistance level.
Australian and US economic indicators are focal points for the Monday session.
However, a break below the $0.66162 support level would bring the trend line and the 200-day EMA into play. Buying pressure could intensify at $0.65760. The 200-day EMA is confluent with the trend line.
A 14-period Daily RSI reading of 68.68 suggests an AUD/USD move to $0.67 before entering overbought territory (typically above 70 on the RSI scale).
AUDUSD 041223 Daily Chart
The AUD/USD sat above the 50-day and 200-day EMAs, reaffirming bullish price signals.
An AUD/USD return to $0.67 would give the bulls a run at the $0.67286 resistance level.
However, a break below the $0.66162 support level would bring the 50-day EMA and the trend line into play.
The 14-period 4-Hourly RSI at 63.92 suggests an AUD/USD move to the $0.67286 resistance level before entering overbought territory.
With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.