AUD to USD Forecast: RBA Stability Review vs. Fed Chatter – What’s Next?

Thursday Overview of the AUD/USD

The AUD/USD declined by 0.25% on Thursday. Partially reversing a 0.83% rally from Wednesday, the Australian dollar ended the session at $0.65698. The Australian dollar rose to a high of $0.66345 before falling to a low of $0.65610.

RBA Financial Stability Review in the Spotlight

The RBA and the Australian economy will be in the spotlight on Friday. On Tuesday, the RBA left the cash rate at 4.35% and toned down the threats of further rate hikes. Nonetheless, the RBA emphasized a willingness to do more to tame inflation.

The impact of inflation and interest rates on households remained a concern for the RBA, creating an uncertain economic outlook.

Views on household vulnerability to the inflation and interest rate environment need consideration. An improving outlook could leave the markets to consider an RBA rate hike if inflationary pressures build. Australian labor market conditions improved markedly in February, which could fuel consumer spending and demand-driven inflation.

US Economic Calendar: Fed Speakers in the Spotlight

Fed Chair President Jerome Powell will be in the spotlight again on Friday. As the dust settles from the Wednesday press conference, Powell will give opening remarks at a Fed Listens event.

Powell and FOMC members will give their views on the current macroeconomic environment. Notably, FOMC members Philip Jefferson and Michelle Bowman will moderate the event.

Fed Chair Powell will unlikely deviate from the Wednesday script. However, FOMC members Jefferson and Bowman could give alternative perspectives.

Recent US economic indicators, including manufacturing and services data, supported expectations of a soft landing. Differing views on the economy and the outlook could influence investor sentiment toward the Fed rate path. Moreover, investors must consider references to inflation and the timeline for a Fed rate cut.

Later in the US session, FOMC member Michael Barr will also be speaking. However, there are no stats from the US to consider.

Short-Term Forecast

Near-term AUD/USD trends will hinge on central bank forward guidance and the macroeconomic environment. A more robust US economy could tilt monetary policy divergence toward the US dollar. While the RBA remains willing to hike rates, the Australian economic outlook remains uncertain.

AUD/USD Price Action

Daily Chart

The AUD/USD hovered above the 50-day EMA while sitting below the 200-day EMA, sending bullish near-term but bearish longer-term price signals.

An Aussie dollar break above the $0.65760 resistance level and 200-day EMA would support a move to the $0.66500 handle. An AUD/USD return to the $0.66500 handle would bring the $0.67003 resistance level into view.

The RBA Financial Stability Review and the Fed warrant investor attention.

Conversely, an AUD/USD break below the 50-day EMA could give the bears a run at the $0.64582 support level.

Considering the RSI indicator, a 14-period Daily RSI reading of 50.85 suggests an AUD/USD return to the $0.67003 resistance level before entering overbought territory.