While the Australian dollar enjoyed a bounce on Friday, the currency is selling off this morning. The currency is lower against the US dollar and the euro, and flat against the British pound. Following the successful US Senate tax vote, global bond yields are rising sharply relative to interest rates in Australia. As the Aussie becomes comparatively less attractive (given falling interest rate differentials), the currency is selling off as a result. Looking at China, the yuan is also weaker this morning. While Chinese bond yields were sharply higher this morning, rates are now trading below 3.9%.
AUD/USD is currently down and trading just above 0.7590. Looking at EUR/AUD, the pair is down and currently just above 1.5610. The GBP/AUD is flat and the exchange rate is currently above 1.770.
This is a significant week for economic data relating to the Australian dollar. Earlier today, TD Securities inflation was higher than the previous print (2.7% vs. 2.6% prior). Tuesday is the big day with RBA rate statement and decision. We’ll also see retail sales. On Wednesday we’ll get GDP growth figures. On Thursday we’ll see AiG Performance of Construction Index and trade figures. Lastly on Friday we’ll get home loans and investment lending for homes.
As the Australian dollar continues to sell off following China's 19th Party Congress, we are downgrading the currency to bearish. Looking at a daily chart of the Aussie, the currency is trading within normal conditions. This is based on various technical indicators.
As the currency weakens on lower rate hike expectations and slow growth, we are now bearish on the Australian dollar in the medium-term. Looking at a weekly chart, the Aussie is trading within normal conditions. Our analysis is based on various technical indicators.