Economists are predicting a slight increase in Judo Bank Services PMI from 52.5 to 53.0 for May, while the Judo Bank Manufacturing PMI is expected to decline from 49.7 to 49.0. The Services PMI is deemed to have a more significant impact on buyer demand for the Aussie dollar, given that the services sector makes up over 60% of the Australian economy. The Reserve Bank of Australia (RBA) recognizes the contributions of the service sector to headline inflation, so investors need to pay close attention to indicators such as prices, employment, and new orders.
Aside from domestic indicators, economic data from China is also crucial to consider. Retail sales, industrial production, fixed asset investment, and the unemployment rate figures from China will be released on Monday and can influence the near-term trends for the Australian dollar. Forecasts suggest that industrial production and retail sales could see a year-on-year increase in May. Better-than-expected results would positively impact buyer demand for the Aussie dollar, as China plays a significant role in Australian exports and economic growth.
Policy Decisions from the People’s Bank of China (PBoC)
Investors should keep an eye on the policy decisions made by the PBoC as they can affect market sentiment towards the Australian dollar. Any surprise cuts to support growth in China could boost buyer appetite for the Aussie dollar. Additionally, the RBA has included considerations regarding the Chinese economy in its economic projections for the years ahead. RBA Governor Michele Bullock may reference these statistics during the press conference, providing further insights into the relationship between Australia and China’s economic performance.
Focus on US Economic Indicators
The US economic data will also impact the AUD/USD pair. Retail sales figures and manufacturing data, such as the NY Empire State Manufacturing Index, will be closely watched by investors. Unemployment figures, jobless claims, and the Philly Fed Manufacturing Index will all play a role in shaping market expectations regarding the US economy and potential Federal Reserve rate cuts. Any unexpected outcomes in these indicators could lead to volatility in the currency markets.
Preliminary private sector PMI numbers are expected to be released towards the end of the week, with forecasts suggesting some movement in both services and manufacturing PMIs. The services sector, which makes up a significant portion of the US economy, will have a greater influence on the Fed rate path and inflation levels. Additionally, speeches from FOMC members could provide further insights into the economic outlook and monetary policy stance of the Federal Reserve.
From a technical perspective, the AUD/USD pair has shown bullish signals by staying above the 50-day and 200-day Exponential Moving Averages (EMAs). A potential move towards the resistance levels at $0.67003 and $0.67500 could be in the cards if the current trend continues. On the downside, a breach of the 50-day EMA could open the door for a test of the 200-day EMA and support levels at $0.65760 and $0.64582. The Relative Strength Index (RSI) reading suggests a possibility of the pair entering oversold territory in the near term.
A multitude of economic indicators and data releases will shape the near-term outlook for the Australian dollar. Trader sentiment, monetary policy decisions, and global economic conditions will all play a role in determining the direction of the AUD/USD pair in the coming days. Investors need to stay informed and pay attention to key developments to make informed trading decisions.
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