AUD to USD Forecast: Australian Economy Expands by 0.2% in Q3

Highlights

• The AUD/USD tumbled by 1.02% on Tuesday, ending the session at $0.65517.
• Australian GDP numbers for Q3 offered early price support on Wednesday.
• US ADP Employment Change figures will garner investor interest later in the session.

Tuesday Overview of the AUD/USD

The AUD/USD slid by 1.02% on Tuesday. Following a 0.77% decline on Monday, the Aussie dollar ended the Tuesday session at $0.65517. The Australian dollar rose to a high of $0.66217 before falling to a low of $0.65440.

Australian GDP Numbers for Q3 in the Spotlight

On Wednesday, Australian GDP numbers for Q3 drew interest. The Australian economy expanded by 0.2% in Q3 vs. 0.4% in Q2. Year-over-year, the economy grew by 2.1%. Economists forecast the economy to expand by 0.4% quarter-on-quarter and by 1.8% year-over-year.

According to the ABS,

• Government spending contributed to growth in the third quarter, rising by 1.1%.
• Significantly, household spending was flat in the quarter, with the household savings ratio falling to 1.1%, the lowest since Q3 2007.
• Higher income tax bills, interest rates, and inflation impacted savings.
• Trade weighed on growth, with an 8.4% increase in imports countering a 1.9% rise in exports.

The Aussie dollar responded positively to the stats. After an initial fall to $0.65581, the AUD/USD rose to a post-stat high of $0.65690.

US ADP Employment Change in the Spotlight

On Wednesday, ADP Employment Change figures will garner investor interest. A larger-than-expected increase in hiring could influence bets on a Q1 2024 Fed rate cut. Tight labor market conditions support wage growth and consumer confidence.

An upward trend in wage growth also fuels consumer spending and demand-driven inflation. Demand-driven inflationary pressures could force the Fed to maintain a hawkish rate path to curb consumer spending and dampen inflationary pressures.

Economists forecast the ADP to report a 130k increase in employment after a 113k rise in October.

Other stats include US trade data that should have a limited impact on the US dollar.

Short-Term Forecast

Near-term trends for the AUD/USD will hinge on the US ADP employment change (Wed) and US Jobs Report (Fri). Better-than-expected labor market numbers could ease bets on a Q1 2024 Fed rate cut, tilting monetary policy divergence toward the US dollar.

AUD/USD Price Action

Daily Chart

The AUD/USD sat below the 200-day EMA while holding above the 50-day EMA, sending bullish near-term but bearish longer-term price signals. Significantly, the AUD/USD fell through the trend line on Tuesday.

An AUD/USD break above the trend line and 200-day EMA would support a move to the $0.66162 resistance level.

US labor market numbers will be the focal point on Wednesday.

However, a drop below the $0.65500 handle would bring the $0.64900 support level into play.

A 14-period Daily RSI reading of 54.50 suggests an AUD/USD move to the $0.66162 resistance level before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

The AUD/USD held below the 50-day while remaining above the 200-day EMA, sending bearish near-term but bullish longer-term price signals.

An AUD/USD break above the trend line would give the bulls a run at the 50-day EMA and the $0.66162 resistance level.

However, a drop below the $0.65500 handle would bring the 200-day EMA and the $0.64900 support level into play.

The 14-period 4-Hourly RSI at 37.83 suggests an AUD/USD fall to the 200-day EMA before entering oversold territory.