AUD to USD Forecast: China’s Real Estate Sector and Fed Commentary Influence

Thursday Overview of the AUD/USD

The AUD/USD gained 0.08% on Thursday. After a 0.05% rise on Wednesday, the Australian dollar ended the session at $0.65568. The Australian dollar rose to a high of $0.65950 before falling to a Thursday low of $0.65404.

China Housing Sector Under the Spotlight

On Friday, house price figures from China will draw investor interest. The real estate sector contributes approximately 30% to the Chinese economy. An improving real estate sector could signal an upward trend in demand.

China accounts for one-third of Australian exports. Australia has a trade-to-GDP ratio above 50%, with 20% of the workforce in trade-related jobs. A pickup in real estate sector activity would be a boon for the Australian economy and the Aussie dollar.

Market sensitivity to the numbers has intensified amidst the ongoing troubles across the real estate sector. Economists forecast house prices to decline by 0.7% in January year-over-year. In December, house prices fell by 0.4% year-over-year.

Beyond the numbers, stimulus chatter from Beijing will also need consideration. Fiscal stimulus measures would drive buyer demand for riskier assets and the Aussie dollar.

US Economic Calendar: Fed Speakers Under the Spotlight

On Friday, investors must consider FOMC member commentary. Reactions to the recent inflation reports, Services PMI survey, and views on interest rates need consideration.

Support for the Fed to delay interest rate cuts until H2 2024 could impact buyer demand for the AUD/USD pair.

The FOMC Meeting Minutes and the US Services PMI influenced bets on an H1 Fed rate cut.

According to the CME FedWatch Tool, the chances of a May Fed rate cut fell from 30.6% to 20.3% on Thursday. However, the probability of a 25-basis point June rate cut increased from 52.9% to 54.2%.

Short-Term Forecast

Short-term AUD/USD trends will hinge on China stimulus measures to bolster the economy and central bankers. Fiscal measures to boost economic activity in China could impact bets on an H2 2024 RBA interest rate cut. A more hawkish RBA rate path would tilt monetary policy divergence toward the Aussie dollar. Investors still expect an H1 2024 Fed rate cut.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar break above the 50-day EMA would give the bulls a run at the 200-day EMA and the $0.66162 resistance level.

China, stimulus chatter, and Fed speakers need consideration.

However, a break below the $0.65500 handle would support a fall to the $0.64900 support level.

A 14-period Daily RSI reading of 49.89 indicates an AUD/USD drop below the $0.64900 support level before entering oversold territory.

4-Hourly Chart

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

An AUD/USD breakout from the 200-day EMA would support a move to the $0.66162 resistance level.

However, a drop below the 50-day EMA would support a fall toward the $0.64900 support level.

The 14-period 4-Hourly RSI at 53.62 indicates an AUD/USD break above the $0.66162 resistance level before entering overbought territory.