AUD to USD Forecast: China’s Data and US PMIs Drive Currency Trends

Highlights

• The AUD/USD gained 0.54% on Thursday, ending the session at $0.66959.
• Australian private sector PMI figures for December were in focus ahead of the Friday Asian session.
• Economic indicators from China and US private sector PMIs warrant investor attention on Friday.

Thursday Overview of the AUD/USD

The AUD/USD gained 0.54% on Thursday. Following a 1.54% surge on Wednesday, the Aussie dollar ended the Thursday session at $0.66959. The Australian dollar fell to a low of $0.66544 before striking a high of $0.67285.

China in the Spotlight

On Friday, the Chinese economy will be in focus. Retail sales, industrial production, fixed asset investment, unemployment, and house price figures will draw investor attention.

A pickup in Chinese economic activity could give the Aussie dollar another boost. However, market sensitivity to China’s housing sector may also influence the buyer appetite for the AUD/USD.

Economists forecast retail sales to increase 12.5% year-over-year vs. 7.6% in October. Significantly, economists expect industrial production to rise by 5.6% year-over-year vs. 4.6% in October. However, economists predict house prices to fall by 0.2% in November after falling 0.1% in October.

An improving macroeconomic environment would be a boon for the Aussie dollar. China accounts for one-third of Australian exports, with 20% of the labor market in trade-related jobs. A pickup in demand from China would support the Australian economy and the Australian dollar.

Earlier in the morning, private sector PMIs for Australia affected buyer demand for the Aussie dollar. The Judo Bank Manufacturing PMI increased from 47.7 to 47.8 in December. Notably, the Judo Bank Services PMI rose from 46.0 to 47.6. The less marked contraction in private sector activity failed to provide early support to the Aussie dollar.

US Service Sector Activity in the Spotlight

The NY Empire State Manufacturing Index, industrial production, and flash private sector PMIs will garner investor interest on Friday. However, the US Services PMI will be the focal point.

The US services sector accounts for over 70% of the economy, increasing US dollar sensitivity to the numbers. Beyond the headline PMI number, investors must consider the subcomponents, including prices and employment. A pickup in price inflation and hiring could question the FOMC projections for 2024.

Economists forecast the S&P Global Services PMI to slip from 50.8 to 50.6 in December. Softer numbers would support the projections for the Fed rate path.

Short-Term Forecast

Near-term trends for the AUD/USD will hinge on the economic indicators from China and the US services PMI. A pickup in economic activity in China and softer-than-expected US service sector activity would drive demand for the AUD/USD.

AUD/USD Price Action

Daily Chart

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

An AUD/USD break above the $0.67296 resistance level would give the bulls a run at the $0.67500 handle.

Economic indicators from China and the US economic calendar are the focal points for the Friday session.

However, a drop below the $0.66500 handle would bring the $0.66162 support level into play.

A 14-period Daily RSI reading of 64.79 indicates an AUD/USD return to the $0.67500 handle before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

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

An AUD/USD break above the $0.67286 resistance level would support a move toward the $0.68096 resistance level.

However, a fall through the $0.66500 handle would bring the $0.66162 support level and the 50-day EMA into play. Buying pressure could intensify at the $0.66162 support level. The 50-day EMA is confluent with the support level.

The 14-period 4-Hourly RSI at 67.98 suggests an AUD/USD move to the $0.67286 resistance level before entering overbought territory.