AUD Daily Updates

02 November 2017

The Australian dollar is up today, thanks to strong trade balance data. The trade balance figures beat expectations by a wide margin thanks to surging iron ore exports. The country's exports of professional services and non-monetary gold are also up significantly. As strong net exports bodes well for future GDP growth, the currency is strengthening as a result. Yesterday, we warned that the Aussie was starting to look oversold in the short-term time frame. While this remains true today, the currency is should re-enter normal trading conditions in the near future if it can keep strengthening. Building approvals also beat expectations.  

AUD/USD is currently trading just below 0.7710. Looking at EUR/AUD, the pair is currently just below 1.5090. The GBP/AUD exchange rate is currently below 1.7190.   

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). Trade balance figures were much higher than expectations (1745m vs 1200m expected), on higher exports of industrial metals. Tomorrow, we’ll see retail sales figures. Last week saw inflation figures miss expectations.

Short term outlook

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

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.