The Australian dollar is mixed today. AUD is currently flat against the US dollar, while selling off against other major currencies. Yesterday, the currency traded in a very similar pattern. The Australian dollar ended the day higher against the US dollar, while selling off against the euro and the British pound.
Looking at AUD/USD today, the pair dipped following RBA minutes. Similar to previous minutes, the RBA has said that a strong currency will slow down the country's growth. The Bank has also pointed out high unemployment rates and high levels of household debt. While the minutes repeated that the next move is likely to be "up", the Bank remains extremely cautious in its outlook. Thanks to a sell-off in the US dollar, AUD/USD had made up its losses and is now slightly higher.
In other news, Chinese equity markets continue to suffer significant sell-offs. In a commentary published yesterday, we argued that problems with the Hong Kong dollar have global implications. This is particularly true for the Australian dollar, given Australia's significant economic relationship with China. While markets are ignoring China's currency problems, this is unlikely to continue in the future. Our short-term outlook on the Australian dollar is neutral, while our medium-term outlook remains bearish.
AUD/USD is flat and trading just above 0.7770. EUR/AUD is up and trading above 1.5930. GBP/AUD is up slightly and trading above 1.8440.
Looking at economic data relating to the Australian dollar this week, important data releases include changes in employment for March. The RBA’s meeting minutes suggested that monetary policy remains in neutral. Tomorrow, we’ll see the Westpac leading index for March as well as NAB business confidence for Q1 2018. More importantly, we’ll see changes in employment and the unemployment rate for March. Last week, RBA Governor Philip Lowe suggested that monetary policy is likely to remain in neutral.
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.