The Australian dollar is once again selling off against all major currencies today. AUD is currently the weakest against the British pound, the US dollar and the euro. The Australian dollar is currently the weakest major currency. In general, China-sensitive assets are selling off today. Equity indices such as Hong Kong's Hang Seng Index and commodity prices (looking at the Dow Jones Commodity Index) are also lower.
As we wrote in previous editions of the Australian dollar daily update, the currency is often seen as a proxy for China's economic prospects. As President Trump targets Chinese trade practices, AUD is under pressure given Australia's significant trading relationship with China. Following potential investment restrictions, the US is considering targeting Chinese trade practices with the help of Germany and France. The news suggests a potential escalation in trade tensions, and increases the probability of an all-out global trade war. Later today, we will downgrade our medium-term outlook on AUD to bearish. Our short-term outlook remains bearish.
AUD/USD is down today and trading just above 0.7660. EUR/AUD is up and trading above 1.6180. GBP/AUD is up and trading above 1.8480.
Looking at economic data relating to the Australian dollar, this is a relatively light week. HIA new home sales (-0.7% vs. -2.1% prior) were better than previous figures. RBA Assistant Governor Kent suggested that the outlook for the Australian economy was upbeat. On Thursday, we'll see private sector credit. Last week, employment changes were worse than expected.
As the Australian dollar weakens, we are downgrading the currency to bearish. 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 runs out of steam, we are now neutral 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.