AUD Daily Updates

05 February 2018

The Australian dollar is mostly flat today. Last Friday, AUD/USD sold off sharply following US non-farm payrolls numbers that were ahead of expectations. As rising jobs and accelerating wages raises the prospect of US rate hikes, US bond yields and the US dollar rallied in response. Today, Australian bond yields are surging in response to Friday's US jobs data. Australian government 10-year bond yields have strengthened from around 2.8% last week to 2.92% currently. If yield differentials between the Australian dollar and other currencies continues to rise, AUD should strengthen in response. So far, this has not been the case. Today, the Aussie is selling off against low yielding currencies including the Japanese yen and the Swiss franc as investors buy safe havens. Our short-term and medium-term outlook on the currency remains bullish.  

AUD/USD is flat and trading just above 0.7920. EUR/AUD is flat and trading above 1.570. GBP/AUD is flat and trading above 1.7790.

Looking at economic data this week, markets will be watching retail sales and an upcoming RBA rate decision. The AIG services index was ahead of the previous figures (54.9 vs. 52 previous). Tomorrow is the big day, and we'll get retail sales, the trade balance and an RBA interest rate decision. Most expect the Reserve Bank of Australia to remain on hold given relatively weak inflation and growth data. We'll also see the AIG construction index. On Friday, we'll get home lending figures. Last week, headline and trimmed mean inflation was slightly below expectations. 

Updated 
Short term outlook
Bullish

As the Australian dollar strengthens, we are upgrading the currency to bullish. Looking at a daily chart of the Aussie, the currency is trading within a normal range. This is based on various technical indicators.  

Medium term 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