Recent Australian wage growth and employment figures fueled bets on further rate hikes. However, uncertainty about the global and Chinese economies and Australian household spending raised concerns among Board members.
Comments on inflation, the economic outlook, and cash rates would influence the buyer demand for the Aussie dollar.
On Tuesday, RBA Governor Michele Bullock raised the possibility of further rate hikes to tackle wage growth. The RBA Governor had this to say about the driving forces behind inflation,
“But actually, there’s an underlying demand component to it as well, and that’s what the central banks are trying to get on top of.”
A higher cash rate would raise borrowing costs and reduce disposable income. Downward trends in disposable income could affect consumer spending and dampen demand-driven inflationary pressures.
There are no Australian economic data for investors to consider on Wednesday.
US Jobless Claims and Consumer Sentiment in the Spotlight
On Wednesday, US jobless claims and Michigan Consumer Sentiment figures will garner investor interest. A downward revision to preliminary consumer sentiment and an unexpected rise in jobless claims could support bets on a May Fed rate cut.
Weaker labor market conditions and waning consumer sentiment affect consumer spending. A downward trend in consumer spending would ease demand-driven inflationary pressures. Easing demand-driven inflationary pressures could allow the Fed to cut rates to avoid a hard landing.
Economists forecast initial jobless claims to decline from 231k to 225k in the week ending November 18. According to preliminary figures, the Michigan Consumer Sentiment Index fell from 63.8 to 60.5 in November.
Short-Term Forecast
Near-term trends will likely hinge on RBA forward guidance and US economic indicators. A hawkish RBA could tilt monetary policy divergence toward the Aussie dollar. The markets are considering a May Fed rate cut while expecting further RBA rate hikes.
AUD/USD Price Action
Daily Chart
The AUD/USD remained above the 50-day EMA while sitting below the 200-day, sending bullish near-term but bearish longer-term price signals.
An AUD/USD move through the 200-day EMA would give the bulls a run at the trend line and the $0.66162 resistance level.
RBA Governor Michele Bullock and US economic indicators will be focal points.
However, a pullback below the $0.65 handle would support a fall to the $0.64900 support level.
A 14-period Daily RSI reading of 63.26 indicates a move to the $0.66162 resistance level before entering overbought territory (typically above 70 on the RSI scale).
