The AUD/USD is our featured currency pair for this week, not only because of key US economic data and the RBA’s rate decision, but we also have Chinese PMI data and more to the point, metal prices are continuing to rise and risk appetite is strong. For these reasons, we maintain a bullish AUD/USD forecast while the pair holds above the 0.65 handle.
Key data highlights for AUD/USD forecast
The following data releases are among the highlights for this week, selected only for the AUD/USD forecast. These include key US labour market numbers, Australia’s rate decision and some Chinese PMI data.
RBA unlikely to cut
The Reserve Bank of Australia’s rate decision is on Tuesday. After trimming rates to 3.6% in August, the RBA is widely expected to wait for the quarterly CPI data before making any further adjustment to the cash rate. The hotter-than-expected monthly CPI data for August, which came in at +3.0% y/y vs. 2.8% in July has raised some question marks over the market’s expectations of another cut in Q4, even if the labour market weakened. Let’s see if the RBA will acknowledge that and whether it will provide any clear hints about the trajectory of interest rates.
Focus will turn to US jobs market
With much of the focus being on a softening US labour market, while inflation concerns linger, any indications of further weakening here should boost expectations of two more rate cuts for 2025. The JOLTS job openings data will kick things off on Tuesday. This is forward-looking and will be taken together with the week’s other employment indicators, including from ISM surveys, ADP and NFP, to gauge the strength, or otherwise, of employment.
Of course, the main data release is on Friday with the release of US non-farm payrolls report. The dollar bounced back in the immediate aftermath of the FOMC rate decision last week after Jerome Powell’s comments that there was no risk-free path to interest rates muddied the waters on where rates are headed next. A lot will now depend on incoming data, with labour market and inflation indicators being the main focus. The Fed will at least need to see continued softness in jobs data if not in inflation before delivering more cuts. Will the NFP score a hattrick of own goals with another softer-than-expected figure for this month? The AUD/USD forecast will take a boost from weak US data, so long as they don’t increase recession fears significantly that it weighs on risk sentiment.
Technical AUD/USD forecast
Since bottoming in April, AUD/USD has been making higher highs and higher lows. But it hasn’t really taken off like some of the other major currency pairs. That’s mainly because the pair is still under a bit of pressure, with expectations that the RBA could cut interest rates at least one more time before the year is out. Still, the path of least resistance looks to be to the upside, given the overall bullish structure, so I’m keeping a bullish AUD/USD outlook.
After a two-week pullback, AUD/USD is now testing key support in the 0.6500 to 0.6550 zone, which I’ve marked in yellow on the chart. The price action looks like a continuation setup—either a bull flag or a falling wedge. If we get a clean break above trendline resistance around 0.6575 to 0.6580, that would be a solid technical signal. In that scenario, we could see AUD/USD push back towards resistance at 0.6625 initially and maybe even retest the recent highs around 0.6770, before deciding on its next move.
But if selling pressure continues and the pair breaks below 0.6500, then the door opens for a move back towards the 200-day moving average, which is sitting in the 0.6392 to 0.6430 area.
All told, we will maintain a slightly bullish AUD/USD forecast owing to an over positive risk appetite and recent US dollar selling.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
