AUD to USD Forecast: Aussie Wobbles with Australian GDP and US PMI on the Horizon
Highlights
- AUD/USD dips 1.27%, erasing Monday’s 0.25% gain; ends Tuesday at a notable $0.63785.
- Economic divergence leans toward the Greenback, throwing light on the ‘China Effect.’
- AUD/USD confronts potential volatility, keeping an eye on US ISM Non-Manufacturing PMI metrics.
Tuesday Overview
The AUD/USD tumbled by 1.27% on Tuesday. Reversing a 0.25% gain from Monday, the Aussie Dollar ended the day at $0.63785. The Australian Dollar rose to a high of $0.64646 before sliding to a low of $0.63574.
Australian GDP Numbers to Put the Aussie Dollar to the Test
Australian GDP figures for the second quarter are out today. After the RBA concerns about the macroeconomic climate, sluggish demand from China may impact growth. Weaker-than-expected GDP numbers would halt further RBA rate hikes. Economists predict a 0.3% growth in the Australian economy, up from 0.2% in the first quarter.
China is crucial for Australian trade. Its demand affects the Australian economy, employment, and currency. 20% of Australian jobs are trade-related, showing the economy’s sensitivity to macroeconomic conditions in China.
US ISM Non-Manufacturing PMI Jitters Likely
Following the weak euro area service sector PMIs, the AUD/USD may face market pressure before the US ISM Non-Manufacturing PMI release.
A US services contraction could hint at a US hard landing. Economists forecast the PMI to drop from 52.7 to 52.5. Given the US services sector represents over 70% of the economy, a contraction could signal a looming US recession.
Immediate Forecast: Economic Divergence?
Economic divergence favors the Greenback. While Australian and US indicators could shift the narrative, Australia must also consider the ‘China Effect.’
AUD/USD Price Action
Daily Chart
The Tuesday sell-off left the AUD/USD at sub-$0.64. While falling through the $0.63854 support level (now a resistance level), the Aussie Dollar avoided the trend line.
However, positive US economic indicators would allow the Fed to keep rates higher for longer. Higher for longer would bring sub-$0.63 and the $0.62749 support level into view. Aussie GDP numbers would need to impress to support a rebound amidst the China doom and gloom.
An RSI reading of 36.07 leaves some room for the AUD/USD to test support at $0.62749 before entering oversold territory.
4-Hourly Chart
The AUD/USD remains below the 50-day and 200-day EMAs, sending bearish price signals. Australian GDP numbers would need to be hotter than expected to break through the $0.63854 resistance level. However, we expect investor angst over the Chinese economy to leave the AUD/USD short of the 50-day PMI.
Weak economic indicators from Australia and the US would fuel fears of a global recession. A fall to sub-$0.6350 would bring the trend line and $0.63 into play.
Considering the RSI at 32.30, the Aussie dollar has room to target the trend line before entering oversold territory.
