AUD Daily Updates

06 February 2018

The Australian dollar sold off sharply for the past two trading sessions. The sharp downturn in global stock markets is the latest driver for weakness in the Australian dollar. Given its status as a commodity currency, the Aussie tends to weaken during global downturns. Safe havens such as the US dollar and the Japanese yen tend to strengthen during downturns. This explains why the sharpest sell-offs have been in AUD/USD and AUD/JPY. Today, AUD/USD is currently flat as markets await further cues from the stock market. Looking at recent economic data and events, month-over-month retail sales and the trade balance both missed estimates. The Reserve Bank of Australia kept rates on hold, while signaling that employment is likely to improve. Reactions in the foreign exchange market were limited following the RBA's decision and statement. Our short-term and medium-term outlook on the currency remains bullish.  

AUD/USD is flat and trading just above 0.7880. EUR/AUD is up and trading above 1.5770. GBP/AUD is up slightly and trading above 1.7740.

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). MoM retail sales (-0.5%) and the trade balance ($-1,358m) were both significantly below estimates. The RBA kept rates on hold, while suggesting that inflation was set to remain weak. The Bank did state, however, that employment was likely to improve. Tomorrow, we'll see the AIG construction index. We'll also 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