AUD to USD Forecast: RBA Minutes and US Labor Stats to Influence Market Sentiment

Aussie Labor Market and the RBA in the Spotlight

On Tuesday, the RBA was in the spotlight. The RBA Meeting Minutes from the less hawkish March policy meeting warranted investor interest. On Thursday, Aussie retail sales and the recent Monthly CPI Indicator raised bets on an RBA rate cut, impacting the AUD/USD.

The RBA Meeting Minutes revealed a consensus that inflation was softening.

Salient points from the RBA Meeting Minutes included,

• GDP growth had been below its historical trend, with consumption persistently weak.
• Labor market tightness eased.
• Inflation continued to soften in recent months, while services inflation remained elevated.
• Financial conditions for households remained restrictive, with households finding it challenging to service their debts and cover essential costs.
• Members agreed that the data signaled inflation was returning to target, with the labor market moving towards full employment.
• Despite lingering uncertainties, the risks were broadly balanced.
• Members agreed it was therefore not possible to either rule in or rule out future changes in the cash rate target.

While the RBA was the focal point, labor market data also needed consideration. The ANZ-Indeed Job Ads fell by 1.0% in March after sliding by 2.8% in February. A downward trend in Job Ads suggests a deteriorating labor market environment.

Weaker labor market conditions could affect wage growth and reduce disposable income. Downward trends in disposable income could force households to curb spending, dampening demand-driven inflation. A weaker outlook on consumption could allow the RBA to consider cutting interest rates.

Earlier in the session, Australian Manufacturing PMI numbers had a limited impact on the Aussie dollar. The Judo Bank Manufacturing PMI fell from 47.8 to 47.3 in March, up from a preliminary 46.8.

US Economic Calendar: JOLTs Job Openings

On Tuesday, the US labor market will also be in the spotlight. The influential JOLTs Job Openings Report warrants investor attention amidst shifting bets on a June Fed rate cut.

Economists forecast JOLTs Job Openings to fall from 8.863 million to 8.790 million in February.

A weaker labor market environment could affect wage growth and consumer confidence. The net effect could be for consumers to curb non-essential spending, dampening demand-driven inflation.

However, investors must consider quit rates. Downward trends in quit rates could highlight weaker confidence in the US labor market. Workers are less likely to leave jobs amid concerns about the labor market environment. Economists forecast Job Quits to fall from 3.385 million to 3.370 million.

Other stats include factory orders. A larger-than-expected increase in orders would align with the ISM Manufacturing PMI Survey. Economists forecast factory orders to rise by 1.0% in February after tumbling by 3.6% in January.

Beyond the numbers, investors must consider FOMC member speeches. FOMC members Michelle Bowman, John Williams, Loretta Mester, and Mary Daly are on the calendar to speak. Views on the timing of a Fed interest rate cut could move the dial.

Short-Term Forecast

Near-term AUD/USD trends will hinge on US labor market data and Fed speakers. Falling bets on a June Fed rate cut could tilt monetary policy divergence toward the US dollar. In contrast, recent data from Australia fueled speculation about an RBA rate cut, sending the AUD/USD to sub-$0.65.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar break above the 50-day EMA would support a move to the $0.65760 resistance level and the 200-day EMA. A breakout from the 200-day EMA would give the bulls a run at the $0.66 handle.

US labor market data and Fed speakers need consideration later in the session.

Conversely, an AUD/USD fall through the $0.65 handle could bring the $0.64582 support level into play.

With a 14-period Daily RSI reading of 39.84, the AUD/USD may drop below the $0.64582 support level before entering oversold territory.