AUD to USD Forecasts: The RBA, the Fed, and the Middle East Conflict in Focus

Highlights

• The AUD/USD declined by 0.30% on Friday, ending the session at $0.62950.
• On Monday, RBA Assistant Governor Brad Jones may react to the recent Australian inflation numbers.
• Fed chatter and news updates on the Middle East conflict will remain focal points.

Friday Overview

On Friday, the AUD/USD declined by 0.30%. Following a 1.56% tumble on Thursday, the Aussie dollar ended the day at $0.62950. The Aussie dollar rose to a high of $0.63344 before falling to a low of $0.62863.

Geopolitical Tensions and RBA Commentary in Focus

RBA Assistant Governor Brad Jones will speak on Monday. Comments relating to the economic outlook, inflation, and cash rates will garner investor interest. Inflation remains sticky and well above the RBA’s target range of 2-3%. Significantly, the Monthly Consumer Price Index Indicator signaled a pickup in inflationary pressure, raising the chances of an RBA rate hike.

Hawkish chatter will likely drive buyer appetite for the AUD/USD.

However, news updates from the Middle East will warrant consideration. News of other nations joining the conflict would likely lead to a flight to the safety of the US dollar.

Fed Speeches and the NY Empire State Manufacturing Index

The New York Empire State Manufacturing Index will garner investor interest on Monday. After the hotter-than-expected US CPI Report, the US dollar bears will respond to signs of weakness in the US economy. A sharp slowdown in manufacturing sector activity may be enough to stir investor jitters about a hard landing.

Economists forecast the NY Empire State Manufacturing Index to decline from 1.9 to -7.0 in October.

However, the manufacturing sector report may not influence Fed monetary policy goals. The US manufacturing sector accounts for less than 25% of the US economy, giving consumer price inflation more weightage during Fed interest rate deliberations.

With economic indicators limited to manufacturing sector data, Fed speeches may impact the AUD/USD pair more. FOMC voting member Patrick Harker speaks on Monday. Harker favored leaving interest rates unchanged on Friday. A shift to a more hawkish policy stance would draw investor interest.

Short-Term Forecast

Fed and RBA speeches will remain the focal point ahead of the RBA meeting minutes on Tuesday. A hawkish RBA outlook on near-term monetary policy intentions would provide much-needed support. However, geopolitics will also influence the buyer appetite for 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.

A return to $0.6350 would support a move toward the $0.63854 resistance level. Hawkish RBA commentary and dovish Fed comments would trigger an AUD/USD move away from the trend line.

However, hawkish Fed comments on interest rates and an escalation in the Middle East conflict would fuel demand for the US dollar. A break below the trend line would give the bears a run at the $0.62500 support level.

A 14-period Daily RSI reading of 39.32 indicates an AUD/USD fall through the trend line before entering oversold territory (typically below 30 on the RSI scale).

4-Hourly Chart

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

A break below the trend line would support a move to the $0.62749 support level.

However, a return to $0.63500 would bring the 50-day EMA and the $0.63854 resistance level into play.

The 14-period 4-Hourly RSI at 35.33 suggests an AUD/USD break below the trend line before entering oversold territory.