Thanks to weakness in the US dollar and good economic data, the Australian dollar continues to rally. Economic data and events from the US (including inflation figures and the Fed's guidance) have led to a recent sell off in the US dollar. Looking at Australia, fears of weakness in the consumer sector are falling after good employment numbers. Specifically, the country created a much larger number of full-time jobs relative to estimates and employment participation rates are also higher than expected. Given positive momentum in the currency, we expect to upgrade our short-term outlook on the currency to neutral over the coming days. Our medium-term trending indicator continues to suggest a bearish trend.
AUD/USD is currently up and trading just above 0.7650. Looking at EUR/AUD, the pair is down and currently just above 1.5430. The GBP/AUD exchange rate is flat and currently above 1.7560.
This is a pretty light week for economic data and events relating to the Australian dollar. Business conditions came in at 12 (vs. 21 prior) while confidence fell to 6 (vs. 8 prior). Quarter-over-quarter house prices fell by 0.2% (vs. 0.5% expected). Westpac consumer confidence was higher than the previous print (3.6% vs -1.7% prior). RBA Governor Philip Lowe's speech did not have a significant impact on the currency. On Thursday employment changes (61.6k vs. 18k expected) and the participation rate (65.5% vs. 65.1% expected) were better than estimates. The unemployment rate (5.4%) met expectations. Last week, GDP growth missed expectations on consumer weakness.
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.