After initially falling sharply yesterday, the Australian dollar managed to stage a rebound. This morning, the Aussie is back to falling again and has thus given up most of its gains. While there is limited news or economic data this week, the currency has been selling off due to weakness in the Chinese yuan (China is the country's biggest trading partner) and industrial commodity prices. The currency has been weakest against the US dollar, which has strengthened this week.
AUD/USD is currently trading below 0.7840, 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 currency has since given up much of those gains. The pair is now trading above 1.50. The Aussie has also lost ground against the pound for most of this week, with GBP/AUD trading above 1.71 this morning.
Today's housing credit and private sector credit data were in line with previous rates of growth (0.5%).
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. The currency is weakening for a variety of reasons including the limited possibility of future interest rate hikes and weakness in China's economy. Looking at a weekly chart, the Aussie has re-entered normal trading conditions having been overbought for most of September. Our analysis is based on various technical indicators.