The Australian dollar is higher against all major currencies today. AUD is currently the strongest against the Japanese yen (a safe haven currency). Yesterday, the currency was weaker at the outset of the day, but ended the day higher. In yesterday's daily update, we noted that weakness in the currency was out of sync with developments in other financial markets. Today, the Aussie has caught up with gains in commodities and Chinese equities.
Turning to recent news, the Australian dollar has managed to ignore worse-than-expected employment figures. While the currency dipped immediately after the news, it managed to climb higher thanks to strength in commodity prices and Chinese equities. Looking at Chinese markets, both Hong Kong's Hang Seng Index and the Shanghai Composite are trading higher today. The Dow Jones Commodity Index (a broad measure of commodity prices), is trading at highs last seen in late 2014. Accordingly, there are plenty of bullish catalysts for the Australian dollar today. Our short-term outlook on the Australian dollar is neutral, while our medium-term outlook remains bearish.
AUD/USD is up and trading just above 0.7790. EUR/AUD is down slightly and trading above 1.5870. GBP/AUD is down and trading above 1.820.
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. The Westpac leading index for March (-0.2% vs. 0.4% prior) was lower than previous figures. NAB business confidence for Q1 2018 (7 vs. 6 previously) accelerated from prior figures. Changes in employment (4.9k vs. 21k expected) were below consensus estimates. 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.