AUD Daily Updates

01 November 2017

The Australian dollar is enjoying a small rebound after ending down yesterday. The currency is now looking oversold in the short-term time frame, especially against the US dollar and the pound. As such, the Aussie is more likely to strengthen from here. Earlier today, the AiG Manufacturing Index showed that the country's manufacturing sector continues to slow (51.1 vs. 54.2 prior). Looking at industrial metals, iron ore and other metals have been weak in recent days. Given the country's reliance on commodity exports, AUD tends to correlate with industrial metal prices. Relative to recent history, GDP growth and inflation in Australia remain weak, lowering the odds of a hike in interest rates. 

AUD/USD is currently trading just below 0.7680. Looking at EUR/AUD, the pair is currently just above 1.5160. The GBP/AUD exchange rate is currently above 1.730.   

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. AiG performance of manufacturing indices were also lower than the previous figure (51.1 vs. 54.2 prior). Tomorrow, we'll see the trade balance. Finally on Friday, we’ll see retail sales figures. Last week saw inflation figures miss expectations.

Updated 
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