AUD to USD Forecast: RBA Meeting Minutes and US Retail Sales in the Spotlight

Highlights

• AUD/USD rallied 0.75% on Monday, closing at $0.63422 after a Friday loss.
• RBA meeting minutes may boost the Aussie dollar if they signal a willingness to hikes rates.
• US retail sales data for September will impact Fed rate hike speculation.

Monday Overview

On Monday, the AUD/USD rallied by 0.75%. Reversing a 0.30% loss from Friday, the Aussie dollar ended the day at $0.63422. The Aussie dollar fell to a low of $0.62996 before reaching a high of $0.63450.

RBA Meeting Minutes and the Middle East Conflict in Focus

The RBA meeting minutes will draw investor interest on Tuesday. A willingness to raise interest rates to curb inflation at the expense of Australian households may deliver an AUD/USD boost. In August, the Monthly Consumer Price Index Indicator signaled a pickup in inflationary pressure, accelerating from 4.90% to 5.20%. The latest figures left the door open for an RBA rate hike.

Away from the economic calendar, hopes of diplomatic channels containing the Middle East conflict would support demand for the AUD/USD. Easing geopolitical tensions would see investors exit the safety of the US dollar in favor of riskier assets. However, investors must monitor updates from the Middle East throughout the day.

US Retail Sales and Fed Speeches

Later today, US retail sales figures for September will garner market attention. After the US CPI Report, a pickup in consumer spending would reignite bets on a Fed interest rate hike.

Economists forecast retail sales to increase by 0.3% in September vs. +0.6% in August.

Consumer spending fuels demand-driven inflation, which may force the Fed to lift rates higher. Higher interest rates would impact borrowing costs and disposable incomes. Lower disposable incomes would pressure consumers to curb spending on non-essential items, subduing demand-driven inflation.

With retail sales in focus, FOMC member commentary also warrants consideration. FOMC members John Williams, Michelle Bowman, and Thomas Barkin will speak today. Voting members Williams and Bowman will likely have more sway on the AUD/USD.

Short-Term Forecast

Near-term trends for the AUD/USD will hinge on Fed commentary and the US Retail Sales Report. Hawkish forward guidance and a pickup in consumer spending would reignite Fed rate hike bets and return the AUD/USD to sub-$0.63.

AUD/USD Price Action

Daily Chart

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

An AUD/USD move to $0.6350 would give the bulls a run at the $0.63854 resistance level. Hawkish RBA meeting minutes and weak US retail sales figures would fuel demand for the Aussie dollar.

However, hawkish Fed speeches and a spike in US retail sales would pressure the appetite for the AUD/USD. A fall below $0.63 would support a move to the trend line and the $0.62649 support level. An escalation in the Middle East would adversely affect the AUD/USD.

A 14-period Daily RSI reading of 43.44 supports an AUD/USD break below the trend line before entering oversold territory (typically below 30 on the RSI scale).

4-Hourly Chart

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

A break above the 50-day EMA would support a move to the $0.63854 resistance level.

However, a return to sub-$0.63 would give the bears a run at the trend line and the $0.62749 support level.

The 14-period 4-Hourly RSI at 45.49 indicates an AUD/USD drop to the trend line before entering oversold territory.