After falling into oversold conditions, the Australian dollar is rebounding this morning. Yesterday, we wrote that AUD was due for a rebound, despite many reasons to be pessimistic towards the Aussie in the longer term. Given recent strength in the Chinese yuan and the broader economy (China is Australia's largest trading partner), the currency was due for a short-term rebound.
AUD/USD is currently trading above 0.7780. Looking at EUR/AUD, the exchange rate remains above 1.50, and is currently above 1.5130. Finally, the pound is down slightly against the Aussie this morning, with the GBP/AUD exchange rate below 1.6920.
This week’s economic data releases include surveys and housing debt-related announcements. Today's business confidence survey results (7), were higher than the previous count (5). Business conditions (14) remained flat relative to the last release (14). On Wednesday, we’ll get consumer confidence data. Finally on Thursday, we’ll see home loan growth, investment lending for housing and consumer inflation expectations. Given the ongoing housing boom in Australia, investors watch data relating to housing fairly closely. Last week's weak retail sales data disappointed the markets, causing AUD to sell off sharply.
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.