Aussie Dollar Forecast: RBA and Beijing to Dictate AUD/USD Trends

Highlights

• The AUD/USD pair experienced a significant drop of 0.61% on Friday, despite a 0.67% rise in the Aussie Dollar over the week.
• Investors should monitor RBA Board commentary and Beijing stimulus updates ahead of the RBA policy decision on Tuesday.
• A significant stimulus package from Beijing would support an AUD/USD breakout.

Friday Overview

The AUD/USD tumbled by 0.61% on Friday. Reversing a 0.15% gain from Thursday, the Aussie Dollar ended the week up 0.67% to $0.64445. The Australian Dollar rose to a Friday high of $0.65218 before falling to a low of $0.64383.

Beijing and the RBA to Dictate AUD/USD Trends

We expect AUD/USD sensitivity to stimulus chatter from Beijing today. While the PBoC takes measures to support the Chinese property sector, Beijing has yet to roll out a significant stimulus package. Efforts to boost growth would signal an AUD/USD breakout.

However, the RBA will deliver its September interest rate decision on Tuesday. Economists expect the RBA to leave the cash rate at 4.10%. The latest Australian employment and inflation numbers support an RBA hold, exposing the AUD/USD to a surprise rate hike.

Company Gross Profits to Reflect the Effects of RBA Rate Hikes

Australian company gross profits for the second quarter need consideration. Economists forecast a 1.9% slide in the second quarter versus a 0.5% increase in Q1. The Q2 figures will reflect the impact of RBA monetary policy moves on corporate Australia.

Lower profit margins from higher borrowing costs and a deteriorating macroeconomic environment would impact employment. Falling employment levels would ease consumer demand-driven inflationary pressures. A downward trend on inflation would support bets on the RBA ending its monetary policy tightening cycle.

US Jobs Report Temporarily Narrows Monetary Policy Divergence

On Friday, the US Jobs Report materially influenced market sentiment toward Fed interest rate goals.

There are no US economic indicators for investors to consider today, with the US markets closed for Labor Day. The lack of stats will leave FOMC member commentary to move the dial.

Dovish FOMC member commentary would ease bets on further Fed rate hikes. An end to Fed rate hikes would shift investor sentiment toward the timing of interest rate cuts.

Immediate Forecast: Beijing and Central Banks

There are no economic indicators from Australia, China, or the US today. However, easing bets on further Fed rate hikes leave investor sentiment toward the RBA and the Chinese economy to influence. A significant stimulus package from Beijing would support an AUD/USD breakout.

AUD/USD Price Action

Daily Chart

Resistance at $0.6490 capped the upside for a third consecutive session on Friday. Investor sentiment toward the Chinese economy and RBA policy must shift to fuel a breakdown resistance at $0.6490. However, Fed bets must remain less dovish to give the bulls a run at $0.6550 and the 50-day EMA.

Risk aversion and hawkish Fed commentary would bring sub-$0.64 and $0.63854 support into view.

An RSI reading of 41.69 leaves the Aussie Dollar with room to fall to $0.64 before entering oversold territory.

4-Hourly Chart

The AUD/USD remains below the 50-day EMA following the Friday pullback. Failure to move through the 50-day EMA would leave $0.63854 support in play. However, the bears need a silent Beijing, risk-off sentiment, and hawkish Fed chatter to deliver a pre-RBA blow.

A move through the 50-day EMA would give the bulls a run at $0.6490 resistance. News of fresh Beijing stimulus and dovish Fed commentary would bring the 200-day EMA into view.

Considering the RSI at 45.77 and the fall below the 50-day EMA, the Aussie dollar can return to sub-$0.64 before hitting oversold territory.