Growth and interest rate differentials to weigh on Australian Dollar: USD/AUD (AUD=X) in time

Growth and interest rate differentials to weigh on Australian Dollar: USD/AUD (AUD=X) in time

Growth and interest rate differentials to weigh on Australian Dollar: USD/AUD (AUD=X) in time

It has been an eventful month for the Australian economy, with GDP and other key data surprising to the downside, and interest rate expectations shifting. Regardless, at USD0.7094, the Australian dollar is unchanged from USD0.7093 when our February Market Outlook went to print, having held a fairly tight range of USD0.7009 to USD0.7183 since.

The detail of the December National Accounts is laid out on page 8 of our March Market Outlook. With respect to the currency, all that needs to be stated is that from a 4% annualised pace in the first half of 2018, GDP growth slowed to just 1% annualised in the second. On the back of this dramatic deceleration, and given our concerns around the effect of declining house prices and soft household income growth on consumption, we look for growth to remain materially below trend at 2.2%yr in both 2019 and 2020. Versus the US, relative growth comparisons will then remain a material headwind for the Australian dollar over the forecast period.

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 0.71.

The projected upper bound is: 0.72.

The projected lower bound is: 0.69.

The projected closing price is: 0.71.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 24 white candles and 25 black candles for a net of 1 black candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 77.7777. This is not an overbought or oversold reading. The last signal was a sell 0 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 43.19. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 58 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -48. This is not a topping or bottoming area. The last signal was a buy 3 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 9 period(s) ago.

Rex Takasugi – TD Profile

FOREX AUD= closed down -0.004 at 0.705. Volume was 41% below average (neutral) and Bollinger Bands were 24% narrower than normal.

Open High Low Close Volume___
0.709 0.710 0.704 0.705 64,144

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 0.71 0.71 0.72
Volatility: 7 11 11
Volume: 95,892 104,548 107,942

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX AUD= is currently 2.4% below its 200-period moving average and is in an downward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of AUD= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on AUD= and have had this outlook for the last 21 periods.

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