AUD to USD Forecast: Global Economy Concerns vs. Aussie Strength

Highlights

• The AUD/USD declined by 0.63% on Thursday, ending the session at $0.64675.
• Concerns about the global economy countered the tight Australian labor market numbers.
• On Friday, US housing sector data and Fed speakers warrant consideration.

Thursday Overview of the AUD/USD

The AUD/USD declined by 0.63% on Thursday. After a 0.03% gain on Wednesday, the Aussie dollar ended the day at $0.64675. The Aussie dollar rose to a high of $0.65169 before falling to a low of $0.64606.

RBA Rate Hike Bets and Global Economic Woes to Test the Aussie

This week, Australian labor market numbers left the door open for more RBA rate hikes. However, global economic indicators signal a weakening demand environment.

Housing sector figures from China countered recent retail sales and industrial production numbers. Significantly, the housing sector contributes about 30% to the Chinese economy. Housing sector woes and a weakening demand environment could impact the Australian economy.

China accounts for one-third of Australian exports. The Australian trade-to-GDP rate is over 50%. Weaker demand from China could impact the Australian economy, the labor market, and the Aussie dollar. 20% of the Australian job market is trade-related.

While the global macroeconomic backdrop will remain a consideration, investors must monitor RBA speeches. As investors raise bets on 2024 Fed rate cuts, recent stats leave a rate hike on the table for the RBA.

There are no Australian economic indicators for investors to consider on Friday.

US Housing Market and Fed Speakers in Focus

On Friday, the US housing market will be in focus. The housing sector is a litmus test for the US economy. Deteriorating housing sector conditions impact credit conditions, consumer confidence, and private consumption. Private consumption contributes over 60% to the US economy. The influence of a US housing market slump on the economy can be significant.

Building permits and housing start numbers reflect the demand environment. Weakening demand could signal a deteriorating US macroeconomic environment.

Economists forecast building permits and housing starts to fall by 1.5% and 1.3%, respectively, in October.

Away from the numbers, investors must monitor Fed speeches. FOMC members Michael Barr, Austan Goldsbee, and Mary Daly are on the calendar to speak. Views on inflation, the economic outlook, and interest rates need consideration.

Short-Term Forecast

Australian wage growth and employment numbers tilted monetary policy divergence toward the Aussie dollar. However, signs of a deteriorating global macroeconomic environment could cap the upside over the near term.

AUD/USD Price Action

Daily Chart

The AUD/USD held 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 $0.64900 resistance level would support a move to $0.65220 and the 200-day EMA.

US housing sector data, Fed speakers, and market risk sentiment will influence the buyer appetite for the AUD/USD.

However, a fall below the $0.64500 handle would give the bears a run at the 50-day EMA and the $0.63854 support level.

A 14-period Daily RSI reading of 56.50 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 holds above the 50-day and 200-day EMAs, affirming bullish near-term price signals.

An AUD/USD move through the $0.64900 resistance level would support a breakout from $0.65220 to target the trend line.

However, a drop below the 50-day EMA would give the bears a run at the 200-day EMA and the $0.63854 support level.

The 14-period 4-Hourly RSI at 53.67 indicates an AUD/USD break above $0.65500 before entering overbought territory.