AUD to USD Forecast: China and US Stats and US-China Talks in the Spotlight

Highlights

• The AUD/USD surged 2.04% on Tuesday, ending the session at $0.65066.
• Softer-than-expected US inflation figures sent the Aussie dollar to $0.65.
• On Wednesday, economic indicators from China will be in focus before the US session.

Tuesday Overview of the AUD/USD

The AUD/USD surged 2.04% on Tuesday. Following a 0.29% gain on Monday, the Aussie dollar ended the day at $0.65066. The Aussie dollar fell to a low of $0.63473 before reaching to a high of $0.65124.

China Economy and US-China Talks in the Spotlight

On Wednesday, economic indicators from China will garner investor interest. Fixed asset investment, industrial production, retail sales, and unemployment numbers for October will be in focus.

Recent private sector PMI numbers have raised concerns about the effectiveness of the stimulus measures from Beijing. Weaker-than-expected numbers could affect the appetite for the Aussie dollar and riskier assets.

China accounts for one-third of Australian exports. Australia has a trade-to-GDP ratio above 50%. Weak demand from China could impact the Australian economy and the Aussie dollar.

Away from the numbers, updates from the US on talks between US President Joe Biden and Chinese Premier Xi Jinping need monitoring. Progress toward better trade terms could counter any weak number from China.

US Retail Sales and Producer Prices in Focus

Later today, retail sales and producer prices for October warrant investor attention. A sharp decrease in retail sales and a weaker-than-expected rise in producer prices could support the market bets on the Fed.

A downward trend in consumer spending would ease demand-driven inflationary pressures and the need for a hawkish Fed rate path.

Economists forecast retail sales to fall 0.3% in October after rising by 0.7% in September.

Weak demand could also influence US producer prices. Producers must lower prices to remain competitive in a weak-demand environment. Significantly, producer prices affect consumer price trends.

Economists forecast producer prices to increase by 0.1% in October after rising 0.5% in September.

Other stats will likely play second fiddle to the retail sales and producer price reports.

With retail sales and inflation in focus, Fed speakers also need monitoring. Any reaction to the recent US stats and comments on interest rates needs consideration. FOMC member Michael Barr is on the calendar to speak.

Short-Term Forecast

Near-term trends for the AUD/USD will likely hinge on the China stats, US-China trade talks, and US retail sales. After the US CPI Report, a weakening US economy and a positive outlook for China trade could fuel further Aussie dollar gains.

AUD/USD Price Action

Daily Chart

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

An AUD/USD break above the 20-day EMA would support a move toward the trend line and the $0.66162 resistance level.

China numbers, US-China talks, and US stats are the focal points.

A fall through the $0.64900 support level would bring sub-$0.64500 and the 50-day EMA into view.

A 14-period Daily RSI reading of 60.74 suggests a move to the 200-day EMA before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

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

An AUD/USD return to $0.65500 would support a move toward the trend line and $0.66162 resistance level.

However, a break below the $0.64900 support level would bring sub-$0.64500 and the 50-day EMA into view.

The 14-period 4-Hourly RSI at 75.17 shows the AUD/USD in overbought territory. Selling pressure may intensify at $0.65500.