After tumbling lower last week, the Australian dollar is taking a breather today. The currency has registered mild losses against major currencies including the US dollar, euro and the pound this morning. Last week, the Aussie had plenty of reasons to weaken including weak inflation figures, and the ouster of Deputy Prime Minister Joyce from parliament (causing the ruling government to lose its mjaority in the lower house), and strength in the US dollar. As the Reserve Bank of Australia remains in neutral and economic data continues to disappoint, the outlook for the currency looks weak.
AUD/USD is currently trading just above 0.7660. Looking at EUR/AUD, the pair is currently just above 1.5140. The GBP/AUD exchange rate is currently above 1.7120.
This is a pretty light week for the Australian dollar. On Monday we’ll see new home sales and AiG performance of manufacturing indices. On Wednesday, we’ll get the trade balance. Finally on Friday, we’ll see retail sales figures. Last week saw inflation figures miss expectations.
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.