AUD to USD Forecast: Aussie Inflation Data Pivotal for RBA Interest Rate Outlook

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Australian Producer Prices and the RBA Rate Path

On Friday, April 26, producer prices from Australia will influence buyer appetite for the AUD/USD.

Economists forecast producer prices to increase 2.6% year-on-year in Q1 2024 compared with a 4.1% increase in Q4 2023.

Additionally, economists expect producer prices to rise by 0.6% in Q1 after advancing by 0.9% in Q4.

Hotter-than-expected producer prices could raise speculation about an RBA interest rate hike. Producers increase prices in a higher-demand environment, passing costs onto consumers.

In Q1, consumer price inflation numbers were higher than forecasts, influencing sentiment toward the RBA rate path. The annual inflation rate eased from 4.1% to 3.6% in Q1 2024.

A higher-for-longer RBA rate path could raise borrowing costs and reduce disposable income. Downward trends in disposable income may curb consumer spending and dampen demand-driven inflation.

US Economic Calendar: Personal Income and Expenditures in Focus

Later in the session, the all-important Personal Income and Expenditures Report will be in focus.

Economists forecast personal income and spending to increase by 0.5% and 0.6% in March, respectively. Personal income and spending rose by 0.3% and 0.8% in February. Moreover, economists expect the Core PCE Price Index to increase 2.6% year-on-year after rising 2.8% in February.

Upward personal income/spending trends and hotter-than-expected inflation numbers could sink bets on a September Fed rate cut.

A more hawkish Fed rate path would raise borrowing costs and lower disposable income. Downward trends in disposable income could affect consumer spending and dampen demand-driven inflationary pressures.

Other economic indicators include finalized Michigan Consumer Sentiment numbers for April. Upward revisions to the headline number and the Michigan Inflation Expectations Index would need consideration.

Short-Term Forecast

Near-term AUD/USD trends will hinge on the US Personal Income and Expenditures Report. Better-than-expected numbers could reduce further investor expectations of a September Fed rate cut. However, Australian producer prices will influence investor sentiment toward the RBA rate path. The RBA watered down discussions about an interest rate hike in March.

AUD/USD Price Action

Daily Chart

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

An Aussie dollar breakout from the 50-day EMA would support a move to the 200-day EMA and the $0.65760 resistance level. An AUD/USD move through the $0.65760 resistance level would give the bulls a run at the $0.66 handle.

Aussie producer prices and the US Personal Income and Expenditures Report need consideration.

Conversely, an AUD/USD fall through the $0.64500 handle would give the bears a run at the $0.64582 support level. A drop below the $0.64582 support level would bring the $0.62713 support level into play.

Given a 14-period Daily RSI reading of 52.07, the AUD/USD could return to the $0.66 handle before entering overbought territory.

AUDUSD 260424 Daily Chart

This article was originally posted on FX Empire

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