AUD Daily Updates

01 February 2018

The Australian dollar is selling off sharply today. While Australia's AiG manufacturing index and China's Caixin manufacturing PMIs were better than expected, Australian construction data was fairly poor. New building approvals fell by 20%, suggesting a slower pace of future building construction. Beyond recent data, the Australian dollar is due for a correction as it has been looking fairly overbought. Following the recent downturn, the Australian dollar is no longer looking overbought. Looking at AUD/USD, the pair has strengthened almost in a straight line since December 11, 2017. The 0.80 region has been an area of significant resistance since mid-2015. Thanks to the latest downturn in AUD/USD, the pair is likely fall below 0.80. Beyond technical considerations, the Australian dollar is also under threat from relative strength in the US dollar. After the Fed signaled an upbeat outlook yesterday, the pace of US interest rate hikes is more likely to accelerate this year. Our short-term and medium-term outlook on the currency remains bullish.    

AUD/USD is up and trading just above 0.8010. EUR/AUD is up and trading above 1.5480. GBP/AUD is up and trading above 1.7720 

This is a fairly light week for economic data relating to the Australian dollar. NAB business confidence missed expectations (11 vs. 12 expected). The headline consumer price index (1.9% vs. 2.0% expected) and the trimmed mean CPI (1.8% vs. 1.9% expected) both missed expectations. The AiG performance of manufacturing index (58.7 vs. 56.2 prior) was strong while new building approvals were much lower than expectations (-20% vs. -8% expected). There were no economic data releases of any significance last week.

Updated 
Outlook
Bullish

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.  

Updated