AUD Daily Updates

31 October 2017

The Australian dollar remains range bound, after tumbling lower last week. The currency is flat against the dollar and the euro this morning, while weakening against the pound. This morning, Chinese manufacturing PMI data missed expectations, suggesting that China's economy is set to decelerate in the coming months. As we covered in our analysis of the recent 19th Party Congress, the longer term outlook for the Australian dollar looks weak thanks to a coming slowdown in Chinese growth. Looking at news from Australia, President of the Senate Stephen Parry now believes he may be a dual citizen (Parry is also British). Last week, the Australian High Court ruled that five of seven MPs were ineligible to serve in parliament. The ruling resulted in Turnbull's government losing its one-seat majority in the lower house of parliament.  

AUD/USD is currently trading just above 0.7680. Looking at EUR/AUD, the pair is currently just above 1.5160. The GBP/AUD exchange rate is currently above 1.720.   

This is a pretty light week for the Australian dollar. New home sales (-6.1% vs. 9.1% prior) and private sector credit (0.3% vs. 0.5%) were weak and lower than previous figures. Tomorrow, we'll see AiG performance of manufacturing indices and the trade balance. Finally on Friday, we’ll see retail sales figures. Last week saw inflation figures miss expectations.

Updated 
Short term outlook
Neutral

Following a small rebound, we are upgrading the Australian dollar to neutral. 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