The Australian dollar continues to rise sharply, following good economic data and weakness in the US dollar and the euro. As the currency has now broken its short-term bearish trend, we will upgrade our outlook to neutral later today. Over the medium-term, the Australian dollar remains in a bearish trend. Looking at Chinese financial markets, while 10-year government bond yields have been hovering below 4%, the Shanghai Composite has been selling off fairly sharply. Recent instability in Chinese currency, bond and stock markets has resulted in AUD weakness since late October.
AUD/USD is currently up and trading just above 0.7690. Looking at EUR/AUD, the pair is down and currently just above 1.5320. The GBP/AUD exchange rate is down and currently above 1.7460.
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 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.