The Australian dollar is fairly weak this morning, despite an ongoing selloff in the US dollar and strength in the Chinese yuan. AUD is weaker against all major currencies this morning. Looking at AUD/USD, the pair ran out of steam around 0.790. Looking at technical indicators such as the Relative Strength Index on a daily chart, the pair is looking overbought at present. While the Chinese yuan is stronger today, AUD weakened following recent Chinese economic data. Figures announced earlier this morning showed lower-than-expected money supply growth and new loans. When lending in China accelerates, the country tends to buy more raw materials from commodity exports based in Australia. As such, the Australian dollar is fairly sensitive to Chinese credit conditions. Our short-term outlook on the currency is bullish, while our medium-term outlook remains neutral.
AUD/USD is currently down and trading just above 0.7870. EUR/AUD is up sharply and trading above 1.5390. GBP/AUD is down and trading above 1.7280.
This is a very light week for economic data relating to the Australian dollar. The AiG performance of construction index was lower than the previous print (52.8 vs. 57.5 prior). Retail sales beat estimates by a significant margin (1.2% vs. 0.4% expected). Last week, the trade balance missed estimates by a wide margin and Australia registered a net trade deficit for October and November.
As the Australian dollar rebounds thanks to strong global growth, we are now neutral 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.