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AUD to USD Forecast: The PBoC, Loan Prime Rates, and Stimulus Chatter

By:
Bob Mason
Updated: Jan 22, 2024, 00:18 GMT+00:00

China's economic indicators trigger hopes for stimulus, affecting the AUD/USD. Later, US economic indicators could influence bets on a March Fed rate cut.

AUD to USD Forecast

Highlights

  • The AUD/USD rose by 0.34% on Friday, ending the session at $0.65952.
  • On Monday, the PBoC will set the Loan Prime Rates for January as investors monitor for stimulus chatter from Beijing.
  • The US CB Leading Index needs consideration later in the session.

Friday Overview of the AUD/USD

The AUD/USD rose by 0.34% on Friday. Following a 0.32% gain on Thursday, the Australian dollar ended the session at $0.65952. The Australian dollar fell to a low of $0.65648 before rising to a high of $0.66016.

China in the Spotlight

On Monday, China will be in the spotlight. Recent economic indicators from China raised expectations for a more meaningful stimulus package to support the struggling economy.

The PBoC will set the 1-year and 5-year loan prime rates (LPR). Economists forecast the PBoC to leave the 1-year and 5-year LPRs unchanged at 3.45% and 4.20%, respectively.

More accommodative measures would support the Australian economy and drive buyer demand for the AUD/USD. However, concerns about debt levels could force the PBoC to leave the LPRs unchanged.

China accounts for one-third of Australian exports. Australia has a trade-to-GDP ratio above 50%, with 20% of the workforce in trade-related jobs. An improving demand environment would improve trade terms.

Beyond the economic calendar, investors must monitor stimulus chatter from Beijing.

US Economic Calendar: CB Leading Index

On Monday, the US CB Leading Index will garner investor interest. Recent economic indicators sank bets on a March Fed rate cut while signaling a resilient US economy. The CB Leading Index could paint a different picture of the US economy entering 2024.

Economists forecast the CB Leading Index to decline by 0.3% in December after falling 0.5% in November. The CB Leading Index signaled a short and shallow US recession in November.

Further labor market and housing indicator declines could support The Conference Board’s expectation of a recession.

There are no FOMC member speakers to influence bets on a March Fed rate cut. The Fed entered the Blackout period on January 21.

Short-Term Forecast

Near-term AUD/USD trends hinge on private sector PMIs, US inflation numbers, and China stimulus plans. US service sector activity and sticky US inflation could tilt monetary policy divergence toward the US dollar.

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 support a break above the $0.66162 resistance level. A breakout from the $0.66162 resistance level would give the bulls a run at the 50-day EMA and the $0.66500 handle.

On Monday, China and US economic indicators are the focal points.

However, a fall through the $0.65500 handle would bring the $0.64900 support level and trend line into play.

A 14-period Daily RSI reading of 40.33 suggests an AUD/USD break below the $0.65 handle before entering oversold territory.

AUD to USD Daily Chart sends bearish price signals.
AUDUSD 220124 Daily Chart

4-Hourly Chart

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

An AUD/USD break above the $0.66162 resistance level and 50-day EMA would support a move to the 200-day EMA. Selling pressure could intensify at the $0.66162 resistance level. The 50-day EMA is confluent with the $0.66162 resistance level.

However, a drop below the $0.65500 handle would support a fall toward the $0.64900 support level and the trend line.

The 14-period 4-Hourly RSI at 50.01 suggests an AUD/USD break above the 200-day EMA before entering overbought territory.

4-Hourly Chart affirms bearish price signals.
AUDUSD 220124 4-Hourly Chart

About the Author

Bob Masonauthor

With over 28 years of experience in the financial industry, Bob has worked with various global rating agencies and multinational banks. Currently he is covering currencies, commodities, alternative asset classes and global equities, focusing mostly on European and Asian markets.

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