AUD Daily Updates

10 November 2017

The Australian dollar has been flat today and was also flat yesterday. While the currency continues to look oversold when looking at a daily chart, a rebound has yet to take hold. Looking at recent news, the Reserve Bank of Australia's statement released earlier today contained few surprises. While the Bank was poised to raise rates earlier this year, monetary policy is looking more neutral now. The Bank's forecast for core inflation (it's preferred measure of inflation) is below the lower band over the forecast period. The forecast for headline inflation exceeds 2% in June 2018. The RBA targets inflation rates of 2-3 percent. The Australian dollar fell after the statement was released, as markets lower their expectations for future rate hikes. Our short-term outlook remains neutral.  

AUD/USD is currently trading just above 0.7670. Looking at EUR/AUD, the pair is currently just above 1.5160. The GBP/AUD exchange rate is currently above 1.7120.  

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. Housing Finance numbers were far below expectations (-2.3% vs. 3% expected) as investors pull back from real estate. The RBA's statement on monetary policy suggested a weak outlook for future inflation. Last week, retail sales figures widely missed expectations.

Updated 
Short term outlook
Neutral

As the Australian dollar rebounds from oversold conditions, we are upgrading the currency to neutral. Looking at a daily chart of the Aussie, the currency is looking 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