The Australian dollar is currently strengthening against all major currencies today. Similar to trading patterns seen yesterday, AUD is currently the strongest against the US dollar and the Japanese yen. While the currency was strong at the outset of the day yesterday, the Australian dollar gave up significant gains during US trading hours (later in the day).
Following today's gains, the Australian dollar is no longer looking oversold and is now trading within normal conditions. While our longer-term outlook for the currency remains bearish, the recent sell-off went too far too quickly. Turning to domestic economic data, the currency received more good news thanks to a higher-than-expected trade balance and faster growth in new building permits. Beyond good figures, commodity prices are also rising today, giving the Australian dollar plenty of reasons to keep strengthening. Both iron ore and copper prices are strengthening today. Our short-term outlook and medium-term outlook on the Australian dollar remains bearish.
AUD/USD is up and trading just above 0.7520. EUR/AUD is down and trading above 1.5930. GBP/AUD is down and trading above 1.8070.
Looking at this week’s Australian dollar economic calendar, this is a relatively important week thanks to an upcoming Reserve Bank of Australia interest rate decision. HIA March new home sales (-2% vs. -0.7% prior), and YoY TD Securities inflation for April (2% vs. 2.1% prior) decelerated from previous figures. YoY private sector credit for March (5.1% vs. 4.9% prior) were higher than previous figures. The performance of manufacturing index for April (58.3 vs. 63.1 expected) and the RBA’s commodity index (-1.4% vs. -4.2% expected) were both better than expected. The RBA kept interest rates and forward guidance unchanged. The AiG performance of services index for April (55.2 vs. 56.9 prior) decelerated from previous figures while YoY building permits for March (14.5% vs. 10.8% expected) were ahead of expectations. The March trade balance ($1,527m vs. 650m expected) was also ahead of expectations. Tomorrow, we’ll see the RBA’s monetary policy statement. Last week, Q1 headline inflation was slightly below expectations.
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.