AUD to USD Forecast: RBA Outlook and US CPI Report to Steer Near-Term Trends

Monday Overview of the AUD/USD

The AUD/USD declined by 0.19% on Monday. Reversing a 0.08% loss from Friday, the Australian dollar ended the session at $0.66136. The Australian dollar rose to a high of $0.66270 before falling to a low of $0.65967.

Australian Business Confidence and Housing Sector in Focus

On Tuesday, housing sector and business confidence numbers will draw investor interest. The housing sector remains an area of interest for the RBA, with elevated inflation and interest rates impacting households. Downward revisions to preliminary figures could impact buyer demand for the Aussie dollar.

According to preliminary figures, building permits declined by 1.0% in January after tumbling 10.1% in December.

A deteriorating housing market could impact consumer confidence and spending. A potential pullback in consumer spending could dampen demand-driven inflation and raise bets on an RBA rate cut.

However, investors must also consider business confidence figures for February. Economists forecast the NAB Business Confidence Index to fall from +1 to -1. A more marked decline could impact sentiment toward the Australian labor market and consumer spending. Weaker business confidence could affect job creation rates and consumer spending trends.

Early in the morning session, RBA Chief Economist Sarah Hunter discussed the economic outlook and interest rates.

US Economic Calendar: US Inflation in the Spotlight

On Tuesday, the all-important US CPI Report will warrant investor attention. A hotter-than-expected CPI Report could sink bets on an H1 2024 Fed rate cut.

Economists forecast the core annual inflation rate to fall from 3.9% to 3.7% in February. However, economists predict annual inflation to hold steady at 3.1%.

A larger-than-expected rise in US nonfarm payrolls in February suggests a robust demand environment. Softer US wage growth and a higher unemployment rate created market uncertainty before the report.

A hotter-than-expected CPI Report may force the Fed to delay an interest rate cut. A higher-for-longer rate path may impact disposable income. Downward trends in disposable income could curb consumer spending and dampen demand-driven inflation.

Short-Term Forecast

Near-term AUD/USD trends will hinge on the US CPI Report. Hotter-than-expected US inflation numbers could impact buyer demand for the AUD/USD. Delays to Fed rate cuts could tilt monetary policy divergence toward the US dollar.

AUD/USD Price Action

Daily Chart

The AUD/USD remained above the 50-day and 200-day EMAs, sending bullish price signals.

An Aussie dollar break above the $0.66162 resistance level would support a move toward the $0.67286 resistance level.

Australian economic data and the US CPI Report need consideration.

However, a drop below the 200-day and 50-day EMAs would give the bears a run at the $0.64900 support level.

A 14-period Daily RSI reading of 61.85 suggests an AUD/USD return to the $0.67 handle before entering overbought territory.

 

4-Hourly Chart

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

A breakout from the $0.66162 resistance level would give the bull a run at the $0.67286 resistance level.

However, a break below the $0.66 handle would bring the 50-day and 200-day EMAs into play.

The 14-period 4-Hourly RSI at 67.93 indicates an AUD/USD move to the $0.67 handle before entering overbought territory.