AUD to USD Forecast: The Chicago PMI and Fed’s Influence

Highlights

• The AUD/USD declined by 0.30% on Thursday, ending the session at $0.68261.
• On Friday, bets on RBA and Fed monetary policy divergence titled toward the Aussie dollar remain a tailwind.
• Central bank chatter, Beijing, and the US economic calendar are focal points.

Thursday Overview of the AUD/USD

The AUD/USD declined by 0.30% on Thursday. Partially reversing a 0.33% gain from Wednesday, the Australian dollar ended the session at $0.68261. The Australian dollar rose to a high of $0.68710 before falling to a low of $0.68242.

RBA Rate Cut Predictions a Tailwind for the AUD/USD

US economic indicators from Thursday highlighted a resilient US economy, impacting the AUD/USD. However, monetary policy divergence remains tilted toward the Aussie dollar. Final monetary policy decisions for 2023 supported an AUD/USD return to the $0.68 handle.

In contrast to the Fed pivot, the RBA considered raising interest rates higher to combat inflation. Australian wage growth, consumer spending, and the impact on demand-driven inflation will be focal points for the RBA. The RBA highlighted wage growth and uncertainty about household spending as concerns.

There are no economic indicators from Australia to consider on Friday. Investors must wait until the New Year to gauge the RBA’s likely rate path for Q1 2024.

US Economic Calendar: Chicago PMI in Focus

On Friday, the US economy will be in the spotlight after softer data from Thursday. Chicago PMI numbers for December will garner investor interest. This week, private sector data for Richmond and Dallas sent mixed signals. A marked fall in the Chicago PMI could test bets on a US soft landing.

Economists forecast the Chicago PMI to fall from 55.8 to 51.0. A fall below 50 could spook investors. Below 50 reflects a contraction across the manufacturing and non-manufacturing sectors in the Chicago region. Significantly, the Chicago PMI is a leading indicator for the ISM survey-based PMIs.

Beyond the numbers, investors must monitor Fed commentary. References to inflation, the US economy, and interest rates need investor consideration.

Short-Term Forecast

Near-term AUD/USD trends hinge on Fed pivot bets and expectations of the RBA holding rates unchanged in H1 2024. Economic indicators from Australia and the US could continue to tilt monetary policy divergence toward the Aussie dollar. Weaker-than-expected Chicago PMI numbers may raise bets on a January Fed rate cut.

AUD/USD Price Action

Daily Chart

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

An AUD/USD break above the Thursday high of $0.68710 would bring the $0.68944 resistance level into play.

The US economic calendar will influence the appetite for the AUD/USD on Friday.

However, a fall through the $0.68096 support level would support a decline toward the $0.67286 support level.

A 14-period Daily RSI reading of 68.29 suggests an AUD/USD return to the Thursday high of $0.68710 before entering overbought territory (typically above 70 on the RSI scale).

4-Hourly Chart

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

A break above the Thursday high of $0.68710 would support a move to the $0.68944 resistance level.

However, a fall through the $0.68096 support level would give the bears a run at the 50-day EMA.

The 14-period 4-Hourly RSI at 53.58 indicates an AUD/USD move to the $0.68944 resistance level before entering overbought territory.