AUD to USD Forecast: Australian Retail Sales and US Consumer Confidence Collide

Australian Retail Sales and the RBA Rate Path

Australian retail sales numbers will put the RBA and the AUD/USD in focus on Tuesday (May 28).

Economists forecast retail sales to increase by 0.3% in April after declining by 0.4% in March.

Household spending is a focal point for the RBA. In the RBA press conference, RBA Governor Michele Bullock cited uncertainties about household spending. The RBA attributed lackluster household spending to the elevated inflation and interest rate environment. A larger-than-expected jump in retail sales could refuel bets on an RBA interest rate hike.

While the retail sales figures need consideration, the monthly CPI Indicator will likely impact the Aussie dollar more on Wednesday (May 29). The RBA warned of a policy response if inflation unexpectedly accelerates despite the current interest rate environment affecting some households.

Economists expect the Monthly CPI Indicator to ease from 3.5% to 3.4% in April.

US Economic Calendar: US Consumer Confidence and the Fed

US consumer confidence will be in focus on Tuesday. Economists forecast the CB Consumer Confidence Index to fall from 97.0 to 95.9 in May. A larger-than-expected fall in the CB Consumer Confidence Index could refuel investor expectations of a September Fed rate cut.

Waning consumer confidence could affect consumer spending and dampen demand-driven inflation. A softer inflation outlook could allow the Fed to take a less hawkish rate path to return inflation to the 2% target.

Other stats include Dallas Fed Manufacturing and housing sector data. However, these will likely play second fiddle to the consumer confidence numbers.

With consumer confidence in focus, investors should monitor FOMC member speeches. FOMC members Neel Kashkari, Lisa Cook, and Loretta Mester are on the calendar to speak on Tuesday. Reactions to the US Services PMI and CB Consumer Confidence Index need consideration.

Short-Term Forecast

Near-term AUD/USD trends could hinge on Aussie retail sales and inflation numbers from Australia and the US. Hotter-than-expected US inflation numbers could tilt monetary policy divergence toward the US dollar. The US economy remains robust while private consumption and the Chinese economy deliver uncertainties for the Aussie economy.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar breakout from the $0.66500 handle could give the bulls a run at the $0.67003 resistance level. Moreover, a break above the $0.67003 resistance level could signal a return to the $0.67500 handle.

Aussie retail sales, US consumer confidence, and Fed speakers need consideration.

Conversely, an AUD/USD break below the 50-day EMA, the $0.65760 support level, and the 200-day EMA could signal a drop to the $0.64582 support level. Buying pressure may intensify at the $0.65760 support level. The EMAs are confluent with the support level.

With a 14-period Daily RSI reading of 53.63, the AUD/USD could climb to the $0.67003 resistance level before entering overbought territory.