AUD Daily Updates

09 April 2018

The Australian dollar is weakening against all major currencies today. AUD is currently the weakest against the the British pound and the US dollar. Last week, the currency ended the week almost flat despite rising trade tensions. While the Australian dollar was higher this morning, it began selling off after Bloomberg reported that China is considering devaluing the yuan in response to US tariffs. 

According to the news report, senior Chinese officials are considering using the Chinese yuan as a negotiation tool as well as considering how a devaluation of the currency would offset any loss in exports due to US tariffs. Given the importance of exports for China's economy (China is relatively more dependent on trade compared to the US), the country remains highly vulnerable to a trade war. As China is Australia's most significant trading partner, the Australian dollar is often used as a proxy for the Chinese economy as trading in the yuan is heavily restricted. As Chinese growth slows this year while US-China trade tensions accelerate, AUD is likely to remain weak. Our short-term and medium-term outlook on the Australian dollar remain bearish. 

AUD/USD is down today and trading just above 0.7650. EUR/AUD is up and trading above 1.6020. GBP/AUD is up and trading above 1.8410.

Looking at economic data from Australia this week, we'll see sentiment data and housing investment numbers. The AiG performance of construction index accelerated from previous figures (57.2 vs. 56 previously). Tomorrow we'll see NAB business confidence for March. On Wednesday, we'll see Westpac consumer confidence and hear a speech from RBA Governor Philip Lowe. On Thursday, we'll see consumer inflation expectations for April, February investment lending for homes and February home loans. Last week, the RBA kept rates on hold. 

Updated 
Outlook
Bearish

As the Australian dollar runs out of steam, we are now bearish 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