Outlook Remains Biased Against the Aussie Currency
"The aussie dollar remains the whipping boy in the FX market and events both domestically and globally keep giving the market reason to trim their long AUD positions," says Richard Driver at Caxton FX who expresses concerns that the recent rally could be due a cooling off period.
Nevertheless, the Pound Sterling remains on the front-foot against the AUD:
"It was a stronger day for the USD yesterday and that had the typical impact of weakening gold prices, which in turn weighed on the AUD yesterday. We are expecting more of the same in today’s session, so we may finally see the 1.70 level breached."
The outlook just keeps getting worse for the Aussie dollar
Gareth Berry at UBS says inflation data is now also weighing on the outlook for the Australian dollar:
"Things are going from bad to worse for the Australian dollar. The currency had already lost its footing under the weight of (1) a broad-based US dollar advance (2) a sharp decline in portfolio flows into Australia (3) greater tolerance of slower growth in China and (4) fears over where Australian growth will come from once mining investment peaks, then recedes.
"Now upstream inflationary pressures are subsiding too. PPI inflation in Q2 dropped to 1.2% y/y (prev. 1.6%), sending AUD/USD sub-0.89. This reinforces the RBA’s view that plenty scope remains for further policy easing.
"Another 25 bp cut from the RBA on Tuesday is almost universally expected."
Outlook for AUD remains bearish
The technical outlook for the Aussie dollar remains challenging. Declines in the headline AUD/USD exchange rate are likely to prompt declines in the crosses eg. GBP/AUD.
Luc Luyet at MIG Bank says:
"AUD/USD has managed to maintain its recent break under 0.8999. The longer-term structure, which is dominated by a weekly diamond formation (not shown) continues to suggest that
a further bout of weakness may have been initiated with this break lower.
"Assuming that non-farm payrolls this afternoon does not derail the trend, scope is seen for a further near-term swing towards the 0.8800 region."
Matt Weller at GFT says today's Non-Farm Payroll data could offer the Australian currency some relief:
"Yesterday, we highlighted a chance to sell the AUD/USD near 3-year lows below the key .9000 level. After consolidating around that level for 16 hours, the Aussie finally resumed its downward trajectory in today’s early U.S. session.
"With rates already halfway to the profit target and major event risk from tomorrow’s Non-Farm Payroll report, it would be prudent to move the stop loss down to limit the risk of loss on the trade.
"Specifically, readers could look to move the stop down from .9050 to .9015 (above the yesterdays post-FOMC high), cutting out over half of the risk on the trade. Beyond that, we will leave the target at .8840 and continue to watch for more weakness later this week and into next week."