AUD to USD Forecast: Market Focus on China PMI and US Economic Data

Thursday Overview of the AUD/USD

The AUD/USD gained by 0.03% on Thursday. Following a 0.73% slide on Wednesday, the Australian dollar ended the session at $0.64975. The Australian dollar fell to a low of $0.64868 before rising to a high of $0.65311.

Manufacturing Sector PMIs Put the Chinese Economy in the Spotlight

On Friday, finalized Manufacturing PMI numbers from Australia drew interest early in the session. The Manufacturing PMI declined from 50.1 to 47.8 in February, up from a preliminary 47.7.

The finalized PMI is unlikely to influence the RBA rate path, contributing less than 10% to the Australian economy.

However, private-sector PMIs from China are out later in the morning and will impact bets on an RBA rate cut. NBS Manufacturing and Non-Manufacturing PMIs and the Caixin Manufacturing PMI will be in focus. The Caixin Manufacturing PMI will impact the AUD/USD more.

Economists forecast the Caixin Manufacturing PMI to decline from 50.8 to 50.6 in February. Weaker-than-expected numbers could raise bets on an H1 2024 RBA rate cut.

During the RBA Press Conference Q&A on February 6, RBA Governor Michele Bullock affirmed that RBA staff factored the Chinese economy into the forecasts for 2024 to 2026.

A weakening demand environment would also increase focus on lawmakers gathering in Beijing next week. Failure to deliver a meaningful stimulus package could force RBA staff to lower forecasts and the RBA to consider an RBA rate cut.

US Economic Calendar: US Manufacturing, Consumer Sentiment, and the Fed

On Friday, US manufacturing sector data and consumer sentiment will garner investor interest.

Economists forecast the ISM Manufacturing PMI to increase from 49.1 to 49.5 in February. Beyond the headline number, investors must consider sub-components, including prices and employment. Higher prices and a faster rate of job creation could test bets on an H1 2024 Fed rate cut.

However, finalized Michigan Consumer Sentiment figures will likely have more impact. According to the preliminary survey, the Michigan Consumer Sentiment Index increased from 79.0 to 79.6 in February. An improving consumer sentiment environment could fuel consumer spending and demand-driven inflation.

Beyond the headline number, investors must consider revisions to inflation expectations. Upward revisions may also reduce bets on an H1 2024 Fed rate cut.

Following inflation numbers on Thursday, FOMC member speeches also need investor consideration. FOMC members Christopher Waller, Raphael Bostic, Mary Daly, and Adriana Kugler are on the calendar to speak. Reaction to recent US economic data and views on the timeline for a Fed rate cut would move the dial.

Short-Term Forecast

Near-term AUD/USD trends will likely hinge on central bank commentary and the US Michigan Consumer Sentiment Report. Upward revisions to the consumer sentiment and inflation expectation numbers could tilt monetary policy divergence toward the US dollar. However, FOMC member speeches must validate bets on a more hawkish Fed rate path.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar return to the $0.65500 handle would bring the 50-day EMA into play. A breakout from the 50-day EMA would give the bulls a run at the 200-day EMA and the $0.66162 resistance level.

Private sector PMIs from China, US economic data, and the Fed need consideration.

However, a drop below the $0.64900 support level could bring the trend line and the $0.63853 support level into play.

A 14-period Daily RSI reading of 40.53 suggests an AUD/USD drop to the trend line before entering oversold territory.

4-Hourly Chart

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

An AUD/USD break above the 50-day EMA would support a move to the 200-day EMA.

However, a break below the $0.64900 support level would bring the trend line and the $0.63853 support level into play.

The 14-period 4-Hourly RSI at 39.47 suggests an AUD/USD drop below the $0.64500 handle before entering oversold territory.