AUD to USD Forecast: Fed’s Powell and the China Manufacturing PMI Impact

Highlights

• The AUD/USD fell by 0.18% on Thursday, ending the session at $0.66042.
• On Friday, manufacturing PMI numbers from China will garner investor interest.
• Later in the session, Fed Chair Powell will be in the spotlight.

Thursday Overview of the AUD/USD

The AUD/USD fell by 0.18% on Thursday. Following a 0.48% decline on Wednesday, the Aussie dollar ended the day at $0.66042. The Aussie dollar rose to a high of $0.66503 before falling to a low of $0.65708.

China Manufacturing PMI in the Spotlight

On Friday, Australian manufacturing PMI was in focus. The Judo Bank Manufacturing PMI fell from 48.2 to 47.7 in November, aligned with preliminary numbers. The numbers had a limited impact on the Aussie dollar. The manufacturing sector accounts for less than 30% of the Australian economy.

However, manufacturing PMI numbers from China could impact the appetite for the Australian dollar. Economists forecast the Caixin Manufacturing PMI to increase from 49.5 to 49.8 in November.

An unexpected fall could pressure the Aussie dollar. However, hopes of further stimulus from Beijing may soften the effects of any weak numbers. China accounts for one-third of Australian exports. With a trade-to-GDP ratio above 50%, demand from China influences the Australian economy and the Aussie dollar.

Fed Chair Powell in Focus

On Friday, US manufacturing sector data for November will garner investor interest. The ISM Manufacturing PMI will be the focal point, with the sub-components needing consideration.

Economists forecast the ISM Manufacturing PMI to increase from 46.7 to 47.6. An unexpected fall could influence bets on a soft landing. However, the manufacturing sector contributes less than 30% to the economy, limiting the impact on inflation and Fed policy moves.

Later in the session, Fed Chair Powell will move the dial. References to the recent economic indicators and views on interest rates warrant attention. The latest US economic indicators support a more dovish Fed rate path. However, Fed Chair Powell has surprised the markets on several occasions.

Short-Term Forecast

Near-term AUD/USD trends hinge on Fed Chair Powell. While investors reduce bets on an RBA rate hike, an H1 2024 Fed rate hike remains on the table. Fed Chair Powell could dictate AUD/USD trends before the RBA interest rate decision on Tuesday, December 5.

AUD/USD Price Action

Daily Chart

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

An AUD/USD break above the $0.66162 resistance level would support a move toward $0.67.

China manufacturing PMI numbers and Fed Chair Powell are the focal points on Friday.

A drop through the $0.66 handle would bring the trend line and the 200-day EMA into play. Buying pressure could intensify at $0.65800. The 200-day EMA is confluent with the trend line.

A 14-period Daily RSI reading of 62.99 indicates an AUD/USD return to the Wednesday high before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

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

An AUD/USD break above the $0.66162 resistance level would support a move to the Wednesday high of $0.66764.

However, a fall through the $0.66 handle would give the bears a run at the 50-day EMA and the trend line.

The 14-period 4-Hourly RSI at 49.28 shows the Aussie dollar in neutral territory. An AUD/USD break below the trend line could send the AUD/USD into oversold territory.