The Australian dollar has again weakened today, following disappointing retail sales figures yesterday and suggestions that the Reserve Bank of Australia may be looking to cut rates (vs. expectations of future rate hikes). We have reduced our short-term outlook on the currency to bearish accordingly.
AUD/USD is currently trading below 0.7780. Looking at EUR/AUD, the exchange rate is now back above 1.50, and is currently above 1.5040. Finally, the pound has been flat against the Aussie, with the exchange rate below 1.6830.
On Monday, we saw fairly strong manufacturing survey data (54.2) and strong inflation figures as well (2.5% YoY). Tuesday's Reserve Bank of Australia interest rate decision and statement was a non-event, as we covered in our preview. Today, we saw weak retail sales data overshadow strong trade balance numbers given concerns regarding future economic growth.
After falling sharply on poor retail sales and comments from the RBA suggesting that interest rates may be heading down (not up, as expected), we are downgrading the Aussie back to bearish. Looking at a daily chart of the Aussie, the currency remains is neither overbought nor oversold, and remains within normal trading conditions. This is based on various technical indicators.
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.