After falling sharply yesterday, the Australian dollar is mostly flat today. Note that AUD is up against the yen today. The recent sell-off in the Australian dollar has been driven by the stock market rout. As a commodity currency, the Australian dollar strengthens during global upturns but falls sharply during downturns. As risk appetite is improving today, the Australian dollar is recovering as a result. Thanks to the recent sell-off, we downgraded our short-term outlook to neutral yesterday. As bullish momentum wanes, the currency is more likely to trade sideways. In the longer term, we maintain a bullish outlook. As we wrote in a recent commentary, it's hard to get too excited about the Australian dollar given its relatively weak economy and limited rate hike expectations. Our medium-term outlook remains bullish.
AUD/USD is flat and trading just above 0.7820. EUR/AUD is flat and trading above 1.5660. GBP/AUD is flat and trading above 1.7720.
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. The AiG construction index accelerated from previous figures (54.3 vs. 52.8 prior). Tomorrow, we'll get home lending figures. Last week, headline and trimmed mean inflation was slightly below expectations.
As the Australian dollar runs out of steam, we are downgrading the currency to neutral. Looking at a daily chart of the Aussie, the currency is trading within a normal range. 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.