The Australian dollar was weaker yesterday, and fell against most major peers. Despite the fact that the currency is looking oversold in the short-term, the Aussie has failed to meaningfully rebound. While the currency appeared to be rebounding last week, lower-than-expected retail sales have dragged the currency back down. Our medium-term outlook on the Australian dollar remains bearish.
AUD/USD is currently trading just below 0.7670. Looking at EUR/AUD, the pair is currently just below 1.5150. The GBP/AUD exchange rate is currently above 1.7130.
This is another pretty light week for the Australian dollar. On Monday, TD Securities year-over-year inflation came in at 2.6% (vs. 2.5% previously). The RBA maintained its cash target rate at 1.5%. The AiG Performance of the Construction Index (53.2 vs. 54.7) was lower than the last print. On Thursday, we’ll see Home Loans figures. Finally on Friday, we’ll get a statement from the RBA on monetary policy. Last week, retail sales figures widely missed 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.