The Australian dollar is giving up some of its gains this morning, particularly against the US dollar and the pound. As we wrote yesterday, the currency is looking overbought against the US dollar and the yen. AUD/USD closed the day yesterday around 0.7820 and is currently trading around 0.78150. The Aussie has been enjoying a significant run-up since mid-December. In general, commodity currencies are weak this morning as key commodities such as copper and crude oil look fairly stretched. Looking at the Chinese yuan (China is the most significant buyer of Australian exports), the offshore yuan is currently flat against the US dollar. Our medium-term outlook on the Australian dollar remains bearish.
AUD/USD is currently down and trading just above 0.78150. EUR/AUD is currently flat and trading above 1.5390. GBP/AUD is up and trading above 1.7390.
This is a very light week for economic data relating to the Australian dollar. On Thursday, we'll see the AiG services index. On Friday, we'll see exports, imports and the overall trade balance. Prior to the holidays, the RBA's minutes suggested a positive economic outlook, while noting weakness in consumer spending.
As the Australian dollar strengthens on good economic data, we are upgrading the currency to neutral. Looking at a daily chart of the Aussie, the currency is now looking overbought. 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.