AUD to USD Forecast: Chinese Stimulus and US Jobs Report Impact

Highlights

• The AUD/USD declined by 0.37% on Thursday, ending the session at $0.67062.
• US labor market stats sent the Aussie dollar to sub $0.67 before a late partial recovery.
• On Friday, the US Jobs Report could dictate the near-term trends for the AUD/USD.

Thursday Overview of the AUD/USD

The AUD/USD fell by 0.37% on Thursday. Following a 0.42% loss on Wednesday, the Australian dollar ended the session at $0.67062. The Australian dollar rose to a high of $0.67598 before falling to a low of $0.66965.

China Stimulus: More Stimulus, More Demand

On Friday, investors must consider stimulus chatter from Beijing. Recent manufacturing sector PMI numbers from China signaled the need for more stimulus to nurse the Chinese economy. In December, the PBoC funded banks to drive housing and infrastructure projects. However, the markets are expecting more.

A sizeable stimulus package would support the Chinese economy and drive 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 demand would be a boon for the Australian economy and the Aussie dollar.

US Economic Calendar: US Jobs Report Takes Center Stage

On Friday, the US Jobs Report will be in focus. Recent US labor market data reflected tight labor market conditions. However, the US Jobs Report will have the final say. Wage growth, nonfarm payrolls, and the unemployment rate need consideration. A steady unemployment rate and a pickup in wage growth could force the Fed to delay rate cuts into Q2.

Tight labor market conditions support wage growth and increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation. A pickup in inflationary pressures could force the Fed to leave rates higher for longer. A more hawkish rate path would impact disposable income, curb spending, and dampen demand-driven inflation.

Economists forecast average hourly earnings to increase 3.9% in December year-over-year versus 4.0% in November. Significantly, economists predict the unemployment rate to rise from 3.7% to 3.8%.

While the US labor market is the focal point, investors must consider the ISM Services PMI. An unexpected increase in the Services PMI could reduce bets on a Q1 2024 Fed rate cut. The services sector accounts for over 70% of the US economy.

Beyond the numbers, Fed speakers also warrant investor attention. Reactions to the US Job Report would move the dial.

Short-Term Forecast

Near-term AUD/USD trends hinge on the US Jobs Report and ISM Services PMI. A pickup in service sector activity, wage growth, and a steady unemployment rate could impact investor bets on a Q1 Fed rate cut. Tighter labor market conditions could tilt monetary policy divergence toward the US dollar.

AUD/USD Price Action

Daily Chart

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

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

Beijing and the US economic calendar will be in focus on Friday.

However, a drop below the $0.67 handle would give the bears a run at the 50-day EMA and the $0.66162 support level.

A 14-period Daily RSI reading of 51.17 suggests an AUD/USD move to the $0.68096 resistance level before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

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

An AUD/USD break above the $0.67286 resistance level would bring the 50-day EMA and the $0.68096 resistance level into play.

However, a fall through the 200-day EMA would give the bears a run at the $0.66162 support level.

The 14-period 4-Hourly RSI at 35.14 indicates an AUD/USD fall to the 200-day EMA before entering oversold territory.