AUD Daily Updates

11 October 2017

Yesterday was a good day for the Australian dollar, and the currency was particularly strong against the US dollar. Earlier, we wrote that AUD was due for a rebound, given recent strength in the Chinese yuan and the broader economy (China is Australia's largest trading partner). Looking at the yuan, the People's Bank of China continues to support the yuan by selling dollars and this should keep the Australian dollar on a strengthening path in the short term. 

AUD/USD is currently trading above 0.7780. Looking at EUR/AUD, the exchange rate remains above 1.50, and is currently above 1.5180. Finally, the pound is down slightly against the Aussie this morning, with the GBP/AUD exchange rate below 1.6960.   

This week’s economic data releases include surveys and housing debt-related announcements. Tuesday's business confidence survey results (7), were higher than the previous count (5). Business conditions (14) remained flat relative to the last release (14). Today, consumer confidence data came in stronger than the previous figures (3.6% vs. 2.5% previously). 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. 

Short term outlook

After a recent rebound following strength in the Chinese yuan, we are now neutral on the Australian dollar. Earlier, the currency fell on poor retail sales and comments from the RBA suggesting that interest rates may be heading down (not up, as expected). Looking at a daily chart of the Aussie, the currency is trading above oversold conditions. This is based on various technical indicators.  

Medium term outlook

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.