AUD Daily Updates

27 October 2017

The Australian dollar remains weak, particularly against the US dollar. The currency is falling after Deputy Prime Minister Barnaby Joyce was declared ineligible to sit in parliament because he was also a citizen of New Zealand when elected. Given that the current government only has a one-seat majority in the lower house, this eliminates the ruling government's majority. Joyce will now need to re-contest his seat (he has already given up New Zealand citizenship). The development is expected to delay the government's plans to enact corporate tax cuts.

AUD/USD is currently trading just above 0.7640. Looking at EUR/AUD, the pair is currently just above 1.5220. The GBP/AUD exchange rate is currently above 1.7090.   

This is a fairly light week for the Aussie in terms of economic data. On Wednesday, we saw year-over-year inflation figures miss expectations (1.8% vs. 2.0% expected). The currency sold off sharply after the data was released. Earlier today, producer prices came in lower than the last print (1.6% vs. 1.7% prior), suggesting that inflation remains weak. Last week, RBA minutes suggested that monetary policy remains in neutral. 

Updated 
Short term outlook
Bearish

After weakening in the fourth week of October, we are downgrading the Australian dollar to bearish. Earlier, the Aussie was strengthening thanks to strength in the Chinese yuan. Looking at a daily chart of the Aussie, the currency is now trading within normal conditions, and does not appear to be oversold. This is based on various technical indicators.  

Medium term outlook
Bearish

After weakening sharply in the latter half of October, we are downgrading the Australian dollar further to bearish. The currency is weak thanks to lower-than-expected inflation rates and falling Australian bond yields. 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.  

Updated