The Australian dollar is weakening against the US dollar today, while trading mixed against most global peers. The main driver of AUD/USD weakness is the ongoing US dollar rebound. Last week, we warned that AUD/USD was looking fairly overbought and was due for a short-term correction. In general, the Australian dollar is benefiting from rising commodity markets and optimism for global growth. The Dow Jones Commodity Index (a broad measure of commodity prices) is up 20% in the past year and trading at the best levels since 2014. As Australian exports are dominated by commodities, the currency tends to track global commodity prices fairly closely. The currency is also fairly sensitive to developments in Chinese financial markets (as China is the country's biggest export destination). The Chinese yuan is also weaker against the US dollar today. Our short-term and medium-term outlook on the currency remains bullish.
AUD/USD is down and trading just above 0.8090. EUR/AUD is up slightly and trading above 1.5340. GBP/AUD is flat and trading above 1.7450.
This is a fairly light week for economic data relating to the Australian dollar. On Monday, we’ll see HIA new home sales. On Tuesday, we’ll get NAB business confidence. On Wednesday, the most important day, we’ll see the consumer price index and the trimmed mean CPI. On Thursday, we’ll see the AiG performance of manufacturing index. There were no economic data releases of any significance last week.
As the Australian dollar strengthens, we are upgrading the currency to bullish. Looking at a daily chart of the Aussie, the currency is looking overbought. This is based on various technical indicators.
As the Australian dollar rebounds, we are now bullish 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.