AUD to USD Forecast: Australian Producer Prices Rose by 0.9% in Q4

Highlights

• The AUD/USD gained 0.07% on Thursday, ending the session at $0.65717.
• On Friday. Australian producer prices…
• Later in the session, the US Jobs Report also needs consideration.

Thursday Overview of the AUD/USD

The AUD/USD gained 0.07% on Thursday. Partially reversing a 0.54% loss from Wednesday, the Australian dollar ended the session at $0.65717. The Australian dollar rose to a high of $0.65791 before falling to a low of $0.65081.

Australian Producer Prices Put the RBA Under the Spotlight

On Friday, Australian producer prices garnered investor interest. Producer prices increased by 0.9% quarter-on-quarter in Q4 2023. Economists forecast producer prices to increase by 0.6% quarter-on-quarter in Q4 2023. In Q3 2023, producer prices increased by 1.8% quarter-on-quarter.

Economists consider producer prices a leading indicator of consumer price inflation. Producers adjust prices based on demand. Softer producer prices could signal a weakening consumer demand environment and a downward trend in consumer price inflation.

This week, Q4 consumer price inflation numbers raised bets on an H1 2024 RBA rate cut. The softer-than-expected producer price figures could support bets on an H1 2024 RBA rate cut.

Other stats include housing sector-related data. However, the numbers will unlikely influence the RBA rate path.

Beyond the economic calendar, stimulus chatter from Beijing also needs consideration.

US Economic Calendar: The US Jobs Report Keeps the Fed in Focus

On Friday, the US Jobs Report warrants investor attention. Hotter-than-expected numbers could further reduce bets on a March Fed rate cut.

Economists forecast average hourly earnings to increase by 4.1% year-over-year in January. In December, average hourly earnings increased by 4.1% year-over-year. However, economists expect the unemployment rate to increase from 3.7% to 3.8%.

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

Other stats include factory orders and finalized Michigan Consumer Sentiment numbers. Revisions to the Michigan Consumer Sentiment numbers could move the dial.

Beyond the numbers, investors must monitor Fed speakers. Deviation from the Fed Chair Powell script could refuel bets on a March Fed rate cut.

Short-Term Forecast

Near-term AUD/USD trends remain hinged on the US Jobs Report and China. A better-than-expected US Jobs Report may impact bets on a March Fed rate cut. Falling bets on a March Fed rate cut and rising bets on an RBA rate cut tilt monetary policy divergence toward the US dollar.

AUD/USD Price Action

Daily Chart

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

An AUD/USD breakout from the 200-day EMA would give the bulls a run at the 50-day EMA and the $0.66162 resistance level. Selling pressure could intensify at the $0.66162 resistance level. The 50-day EMA is confluent with the $0.66162 resistance level.

Stimulus chatter from China, Australian producer prices, and the US Jobs Report need consideration.

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

A 14-period Daily RSI reading of 41.27 indicates an AUD/USD fall to the $0.64900 support level before entering oversold territory.

4-Hourly Chart

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

An AUD/USD break above the 50-day EMA would support a move to the $0.66162 resistance level and 200-day EMA.

However, a fall below the $0.65500 handle would give the bears a run at the $0.64900 support level.

The 14-period 4-Hourly RSI at 45.47 indicates an AUD/USD fall to the $0.64900 support level before entering oversold territory.