Fundamental Outlook for Australian Dollar: Bearish
- Australian Economic Growth Slowest in 16 Years, Says Westpac
- RBA Minutes Reiterate Pause in Interest Rate Cuts is Likely
The Australian dollar looks to a quiet week with little of significance on the economic calendar and most traders away for the Christmas holiday. Indeed, November’s New Vehicle Sales release is the only noteworthy item on the docket, with little scope for improvement after the 7-year low that printed in October. With credit availability sharply lower and unemployment at the highest in nearly two years, consumers are unlikely to commit to big-ticket purchases.
Broadly speaking, the outlook for the Australian Dollar remains bearish: overnight index swaps price in a 197 basis point shift in yield differentials in favor of the US dollar against the Aussie over the next 12 months; meanwhile, technical positioning sees AUDUSD showing a decisive Bearish Engulfing candlestick formation near the top of the recent upswing; finally, the DailyFX Speculative Sentiment Index sees AUDUSD overweight on the long side and likely to favor the downside.
On balance, price action may become muted next week as the onset of the Christmas holiday turns traders’ attention elsewhere. Liquidity is sure to remain low, so relatively small positions may be able to push AUDUSD around to make for erratic trading as December ends. That said, indications point to Australian Dollar weakness once volume returns in force after the New Year.
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