Australian Dollar Forecast: RBS Foretell of Further AUD Declines as GBP/AUD Cracks Ceiling at 1.17

The Australian Dollar (Currency:AUD) is being sold off on Tuesday afternoon, mirroring moves in the New Zealand dollar:

• The Pound to Australian dollar exchange rate is 0.62 pct higher at 1.7010.
• The Euro to Australian dollar exchange rate is 0.21 pct higher at 1.4570.
• The Australian dollar to US dollar exchange rate is 0.7 pct lower at 0.9085.

Please be aware that these are wholesale spot market quotes and your bank will subtract their own discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, therefore delivering you more currency. Please learn more here.

Outlook for Australian dollar: Up then down

Greg Gibbs at RBS tells us the Australian dollar is likely to resume a downward bias after a short period of strength:

"Chinese commodity indicators have been generally stronger for the last two months, consistent with the better than expected industrial activity data reported last week. Chinese equities have been stable to stronger for two months.

"Global resource equities have been rising for the last month and a half and reached a high since Q1 last week. However, despite these signs of strength the AUD reached its low point only a week ago and is still yet to convincing break out of a rapid down-trend since April.

"The falling AUD despite improving commodity indicators in recent months may reflect a deep scepticism over the medium term outlook in China and domestic indicators in Australia showing that overall business confidence remained weak.

"There was perhaps a belated response in the AUD to weaker commodity indicators since 2011 that continued after commodity indicators had stabilised.

"The mood shift in the mining sector in Australia towards a clear peaking in the investment boom made the AUD less response to signs of stability in China.

 "The AUD bear move may have now extended beyond the current pace of activity in China that has stabilised at a still solid pace of growth. For the near term the AUD may continue to recover to test and potential break its current down-trend, sufficient to squeeze out what may be excessive short positions. This could take AUD up to test the key resistance at around 0.93, and as high as 0.95. However, we continue to forecast 0.83 at year end.

"AUD key resistance at around .9290/.9300, and 38.2% retracement level near 0.95. First Support .9130."