The Australian dollar has been mostly falling this week, particularly against the US dollar. Following remarks by Federal Reserve Chair Yellen indicating that more interest rate hikes were likely, the Aussie has weakened. Unlike the US, the Reserve Bank of Australia has denied any inclination to raise interest rates. As markets price in higher interest rates for the US dollar in the future, the Australian dollar has sold off accordingly.
AUD/USD is currently trading near 0.7830, having started the week closer to 0.7960. While the Aussie strengthened sharply against the euro on Monday (following German elections results over the weekend), the pair has since weakened below 1.50. EUR/AUD is currently closer to 1.4970. AUD has fallen all week against the Japanese yen, despite subsiding tensions in the Korean Peninsula. AUD/JPY is currently trading around 88.50, having started the week closer to 90.20.
This is a very slow week for economic data in Australia. This Friday we'll see housing credit and private sector credit data - both of which are unlikely to influence the currency.
After falling on recent comments from RBA Governor Philip Lowe and a continuing industrial metals bear market, the Australian dollar is looking more bearish. Looking at a daily chart of the trade-weighted Aussie, the currency is neither overbought nor oversold, and remains within normal trading conditions.
From a medium term perspective, we are downgrading the Aussie to bearish on continuing weakness. The Aussie has weakened in the last three weeks of September, and continues to sell off. Looking at the Relative Strength Index on a weekly chart, the trade-weighted Aussie is below overbought levels. Thus trading conditions remain normal.