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AUD to USD Forecast: The China Caixin Manufacturing PMI in Focus

By:
Bob Mason
Published: Jan 31, 2024, 23:24 UTC

On Thursday, the AUD/USD will be in the hands of the manufacturing sector and US labor market data. Signals of weaker demand could impact riskier assets.

AUD to USD Forecast

In this article:

Highlights

  • The AUD/USD fell by 0.54% on Wednesday, ending the session at $0.65650.
  • Australian inflation numbers for Q4 and the Fed left the Aussie dollar in negative territory.
  • On Thursday, manufacturing PMI numbers from China will influence ahead of the US session.

Wednesday Overview of the AUD/USD

The AUD/USD fell by 0.54% on Wednesday. Following a 0.12% loss on Tuesday, the Australian dollar ended the session at $0.65650. The Australian dollar rose to a high of $0.66226 before falling to a low of $0.65514.

Asian Economic Calendar: Australian and China Manufacturing PMIs

On Thursday, the manufacturing sector is under the spotlight. The all-important China Caixin Manufacturing PMI warrants investor attention. Economists forecast the China Caixin Manufacturing Index to decline from 50.8 to 50.6 in January. A larger-than-expected fall in the PMI would impact buyer demand for the AUD/USD.

Weaker manufacturing sector activity could signal a weakening demand environment. Australia has a trade-to-GDP ratio above 50%, with China accounting for one-third of total exports. A decline in exports to China could impact the Australian economy, workforce, and the Australian dollar. 20% of the workforce is in trade-related jobs.

Other stats include Australian building permit numbers for December. However, these will likely play second fiddle to the PMI data from China.

Earlier today, manufacturing numbers from Australia were disappointing. The Judo Bank Manufacturing PMI increased from 47.6 to 50.1 in January, down from a preliminary 50.3.

Cost pressures eased, giving the RBA further evidence of a shift in inflation trends. However, service sector price pressures have more weight. The services sector contributes over 60% to the Australian economy,

US Economic Calendar: Jobless Claims and Manufacturing PMIs

Later in the session, US labor market data and ISM Manufacturing PMI numbers will garner investor attention. On Wednesday, Fed Chair Powell warned it was too soon to write off a hard landing. An unexpected spike in jobless claims and a slump in manufacturing sector activity could spook investors.

Economists forecast the ISM Manufacturing PMI to fall from 47.4 to 47.0 in January. Significantly, economists predict initial jobless claims to fall from 214k to 212k.

However, investors must consider Q4 nonfarm productivity and unit labor cost figures.

Short-Term Forecast

Near-term AUD/USD trends hinge on the US Jobs Report and economic data from China. A hotter-than-expected US Jobs Report could further sink bets on a March Fed rate cut. Weaker-than-expected data from China would also pressure the AUD/USD as investors raise bets on an RBA rate cut.

AUD/USD Price Action

Daily Chart

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

An AUD/USD move through the 200-day EMA would bring the $0.66162 resistance level and the 50-day EMA into play. Selling pressure may intensify at the $0.66162 resistance level. The 50-day EMA is confluent with the $0.66162 resistance level.

Stimulus chatter from China, PMI numbers from China, and the US economic calendar need consideration.

However, a break below the $0.65500 handle would give the bears a run at the $0.64900 support level.

A 14-period Daily RSI reading of 39.52 suggests an AUD/USD fall to the $0.64900 support level before entering oversold territory.

AUD to USD Daily Chart sends bearish price signals.
AUDUSD 010224 Daily Chart

4-Hourly Chart

The AUD/USD hovered below the 50-day and 200-day EMAs, confirming bearish price trends.

An AUD/USD breakout from the 50-day EMA would give the bulls a run at the $0.66162 resistance level and the 200-day EMA.

However, a break below the $0.65500 handle would support a fall to the $0.64900 support level.

The 14-period 4-Hourly RSI at 41.97 suggests an AUD/USD fall to the $0.64900 support level before entering oversold territory.

4-Hourly Chart affirms bearish price signals.
AUDUSD 010224 4-Hourly Chart

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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