When looking at the relationship between economic indicators and the Australian dollar, it is crucial to pay attention to Chinese industrial profit numbers. China plays a significant role in the Australian economy, accounting for one-third of Australian exports. Therefore, any fluctuations in Chinese industrial profits could have a direct impact on buyer appetite for the Aussie dollar. Economists are forecasting a 4.1% year-on-year increase in Chinese industrial profits for May, following a 4.3% rise in April. However, weaker-than-expected numbers could signal trouble for the Chinese manufacturing sector, which in turn could affect demand for the Aussie dollar.
While Chinese industrial profit numbers are important, US economic indicators also play a key role in shaping the direction of the Australian dollar. Investors will be closely watching US jobless claims data, with economists forecasting a small decrease in initial jobless claims. A larger-than-expected fall could lead to reduced expectations of a September Fed rate cut, impacting the Aussie dollar. Tighter labor market conditions may support wage growth, leading to increased consumer spending and inflationary pressures. On the other hand, a higher Fed rate path could raise borrowing costs and dampen demand-driven inflation.
The divergence in monetary policies between the RBA and the Fed is another factor to consider when analyzing the Australian dollar. Softer-than-expected US inflation numbers could shift monetary policy divergence in favor of the Aussie dollar. The recent Australian Monthly CPI Indicator has raised expectations of an August RBA rate hike, while hopes of a September Fed rate hike will depend on upcoming US inflation data. The AUD/USD pair has remained bullish, trading above key moving averages and resistance levels. A breakout above $0.66500 could lead to a further rally towards $0.67003 and potentially $0.67500.
In addition to economic indicators, technical analysis can provide valuable insights into the future direction of the Australian dollar. A break below the 50-day EMA could signal a downward trend towards the 200-day EMA and the $0.65760 support level. With a 14-period Daily RSI reading of 52.51, there is room for the AUD to appreciate further towards the $0.67500 level before reaching overbought territory. Australian consumer inflation expectations and Chinese industrial profit numbers will continue to be important factors to watch as the Australian dollar reacts to changing economic conditions.
The Australian dollar remains sensitive to a variety of economic indicators, both domestic and international. As investors assess the implications of inflation numbers, Chinese industrial profits, and US economic data, the outlook for the Aussie dollar will be shaped by a combination of fundamental and technical factors. It is essential for traders and analysts to stay informed and adapt their strategies accordingly in response to changing market conditions.