AUD to USD Forecast: RBA’s Decision and China’s PMI Impact

Highlights

• The AUD/USD declined by 0.77% on Monday, ending the session at $0.66195.
• On Tuesday, service sector PMIs from China and the RBA will influence the appetite for the AUD/USD.
• Later in the session, US services PMIs and JOLTs Job Openings will also be focal points.

Monday Overview of the AUD/USD

The AUD/USD declined by 0.77% on Monday. After a 1.01% rally on Friday, the Aussie dollar ended the Monday session at $0.66195. The Australian dollar rose to a high of $0.66906 before falling to a low of $0.66048.

Asian Service Sector PMIs in Focus

On Tuesday, service sector PMI numbers from China will draw investor interest. Better-than-expected numbers from China could support the Aussie dollar. An improving Chinese economy would be a boon for the Australian economy and the Aussie dollar.

China accounts for one-third of Australian exports. An improving macroeconomic backdrop could increase demand from China. Australia has a trade-to-GDP ratio above 50%, with trade-related jobs accounting for 20% of the labor market. Improving labor market conditions would support wage growth, disposable income, and consumer spending.

Economists forecast the Caixin Manufacturing PMI to increase from 50.4 to 51.0 in November.

While the PMI needs consideration, the RBA’s interest rate decision is the main event of the session.

RBA Interest Rate Decision and Rate Statement the Focal Point

On Tuesday, the RBA will deliver its final interest rate decision and Rate Statement of the year. Softer inflation numbers and weaker labor market conditions fueled bets on the RBA ending its rate hike cycle. Economists expect the RBA to leave the cash rate unchanged at 4.35%. Barring a surprise policy move, the Rate Statement will be the focal point.

A hawkish Rate Statement citing elevated inflation and resilient wage growth would spur an Aussie dollar rally.

US Services Sector and the Labor Market in the Spotlight

On Tuesday, the all-important ISM Non-Manufacturing PMI and JOLTs Job Openings will garner investor interest.

An unexpected fall in the ISM Non-Manufacturing PMI and a slide in Job Openings would impact the US dollar. The US services sector accounts for over 70% of the economy and remains the driving force for inflation. A deteriorating services sector could affect the labor market, inflation, and the economy.

A slide in Job Openings could impact wage growth, disposable income, and consumer spending. The combination would support bets on a Q1 2024 Fed rate cut.

Economists forecast the ISM Non-Manufacturing PMI to increase from 51.8 to 52.0 in November. However, economists expect JOLTs Job Openings to fall from 9.553 million to 9.350 million in October.

Short-Term Forecast

Near-term trends for the AUD/USD will depend upon the RBA, US services sector PMIs, and the US Jobs Report (Fri). Weak PMI and labor market numbers from the US and a hawkish RBA would support an AUD/USD return to $0.67.

AUD/USD Price Action

Daily Chart

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

An AUD/USD return to $0.66500 would give the bulls a run at the $0.67286 resistance level.

China PMIs, the RBA, and US economic indicators are focal points for the Tuesday session.

However, a fall through the $0.66162 support level would support a drop to the trend line and the 200-day EMA. Buying pressure may intensify at $0.65700. The 200-day EMA is confluent with the trend line.

A 14-period Daily RSI reading of 60.91 indicates an AUD/USD return to the Monday high of $0.66906 before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

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

An AUD/USD break above the $0.66500 handle would support a move to the $0.67286 resistance level.

However, a fall through the $0.66162 support level would bring the 50-day EMA and sub-$0.66 support levels into play.

The 14-period 4-Hourly RSI at 47.21 indicates an AUD/USD drop to the trend line before entering oversold territory.