It has been a horrendous month for AUDUSD with the pair falling around 6.4% since the beginning of September, making the aussie the worst performing currency against the USD over this period. For many analysts and the RBA, the recent sell-off of the Australian dollar seemed inevitable. Falling commodity prices, a slowing Chinese economy, and the loosest monetary policy in the history of the RBA are all weighing on the commodity currency. Yet, the biggest factor in AUDUSD’s decline has been widespread USD strength, perpetrated by the notion of tighter interest rates in the US.
The market is now asking itself has AUDUSD fallen far enough? The answer to this question may not be as simple as a yes or no. We think AUDUSD’s massive sell-off may have overextended itself in the short-term, but our long-term bias remains lower due to diverging fundamentals between the US and Australia and its major trading partner, China. As my colleague Matt Weller discussed at the end of last week, the technicals suggest that upside momentum may be building in the short-term. In saying that, after this morning’s fresh sell-off we are keeping a close eye on a support zone around 0.8660.
From a fundamental standpoint, the short-term movement of the pair may be dictated by numerous important pieces of economic data from Australia, China and the US.
Data watch
- US August personal spending (Monday) – exp. 0.4% m/m
- US August pending home sales (Monday) – exp. -0.5% m/m
- China HSBC Final September PMI (Tuesday) – exp. 50.5
- US CB Consumer Confidence Index (Tuesday) – exp. 92.5
- China official September Manufacturing PMI (Wednesday) – exp. 51.0
- Australia August retail sales (Wednesday) – exp. 0.4% m/m
- Australia commodity price (Wednesday)
- US ADP non-farm employment change (Wednesday) – exp. 207K
- US September ISM Manufacturing Index (Wednesday) – exp. 58.3
- Australia August building approvals (Thursday) – exp. 1.3% m/m
- Australia August trade data (Thursday) –exp. -850m
- US employment claims (Thursday)- exp. 298K
- US September non-farm employment change (Friday) – exp. 215K
- US August trade balance (Friday) – exp. -40.8bn
- US September unemployment rate (Friday) – exp. 6.1%
- US September ISM Non-Manufacturing PMI (Friday) – exp. 58.5
Source: FOREX.com
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