AUD to USD Forecast: RBA Bulletin to Influence Bets on an RBA Rate Hike

Highlights

• The AUD/USD slipped by 0.03% on Wednesday, ending the session at $0.65771.
• Australian and US private sector PMIs for January influenced buyer appetite for the AUD/USD pair.
• On Thursday, the RBA Bulletin warrants investor attention before the US session.

Wednesday Overview of the AUD/USD

The AUD/USD slipped by 0.03% on Wednesday. Following a 0.14% gain on Tuesday, the Australian dollar ended the session at $0.65771. The Australian dollar fell to a low of $0.65659 before rising to a high of $0.66209.

RBA Bulletin in Focus

On Thursday, the RBA bulletin warrants investor attention. Wage growth indicators, household spending, inflation expectations, and the economic outlook need consideration.

Sentiment toward the RBA rate path for 2024 remains mixed. Economists at the big four Australian banks predict rate cuts in late Q3 or Q4. However, the risk of a final interest rest rate hike lingers. In December, the RBA considered hiking rates but chose to view more economic indicators.

The RBA Bulletin could give early clues on the RBA policy goals before the inflation numbers out on January 31. Economists forecast the inflation rate to soften from 1.2% to 0.8% quarter-on-quarter in Q4. Hotter-than-expected numbers could cement an RBA rate hike on February 6.

A hawkish RBA Bulletin could raise bets on a February RBA rate hike and drive demand for the Aussie dollar.

US Economic Calendar: Q4 GDP and Jobless Claims in Focus

On Thursday, GDP numbers for Q4 and the US labor market will be in focus. Tight labor market conditions and a resilient US economy could allow the Fed to delay cutting interest rates.

Economists forecast the US economy to expand by 2% quarter-on-quarter in Q4 vs 4.9% in the third quarter. Beyond the headline number, investors must consider consumer spending, disposable income, and PCE price index trends. Downward trends in consumer spending, disposable income, and inflation could fuel bets on a March Fed rate cut.

However, labor market conditions remain a focal point for the Fed. Economists expect initial jobless claims to increase from 187k to 200k in the week ending January 20.

Tight labor market conditions could support wage growth and increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation. Wage growth and consumer spending would influence the Fed interest rate trajectory through H1 2024.

Other stats include durable goods orders, housing sector stats, and trade data. However, these will likely play second fiddle to the GDP and jobless claims figures.

Short-Term Forecast

Near-term AUD/USD trends hinge on US and Australian inflation figures. Softer-than-expected US inflation numbers and sticky Australian inflation could tilt monetary policy divergence toward the Aussie dollar.

AUD/USD Price Action

Daily Chart

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

An AUD/USD break above the 200-day EMA would support a move to the $0.66162 resistance level and the 50-day EMA. A breakout from the 50-day EMA would bring the $0.66500 handle into play.

On Thursday, the RBA Bulletin and the US economic calendar need consideration.

However, a drop below the $0.65500 handle would give the bears a run at the $0.64900 support level.

A 14-period Daily RSI reading of 39.25 indicates an AUD/USD fall through the $0.65 handle 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 $0.66162 resistance level. A move through the $0.66162 resistance level would bring the 200-day EMA into play.

However, a drop below the $0.65500 handle would give the bears a run at the $0.64900 support level.

The 14-period 4-Hourly RSI at 52.87 indicates an AUD/USD break above the 200-day EMA before entering overbought territory.