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AUD/USD Rate Rebound Fizzles Amid Turnbull Turmoil

AUD/USD Rate Rebound Fizzles Amid Turnbull Turmoil

David Song,
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Australian Dollar Talking Points

AUD/USD gives back the rebound this month as Australia Prime Minister Malcolm Turnbull struggles to secure his seat, and the exchange rate appears to be on track to test the August-low (0.7203) as it snaps the series of higher highs & lows carried over from earlier this week.

Image of daily change for major currenciesImage of daily change for audusd

The recent backlash against Mr. Turnbull appears to be dragging on the Australian dollar as it has the potential to alter the monetary policy outlook, and a change in leadership may keep AUD/USD under pressure as it encourages the Reserve Bank of Australia (RBA) to further support the real economy.

Image of rba cash rate

The RBA Minutes suggest the central bank will keep the official cash rate (OCR) on hold at the next meeting on September 4 as ‘there was no strong case for a near-term adjustment in monetary policy,’ and Governor Philip Lowe & Co. may stick to the sidelines throughout the remainder of the year as ‘the direction of international trade policy in the United States continued to be a source of uncertainty for the global outlook.’

With that said, the uncertainty surrounding the fiscal outlook may continue to rattle the Australian dollar, and the broader outlook for AUD/USD remains tilted to the downside as the exchange rate fails to retain the summer range, with the Relative Strength Index (RSI) also reinforcing a bearish outlook as it extends the downward trend from earlier this year. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

AUD/USD Daily Chart

Image of audusd daily chart
  • AUD/USD appears to have marked a failed run at the July-high (0.7484), with the lack of momentum to clear the 0.7400 (38.2% expansion) handle raising the risk for a run at the monthly-low (0.7203).
  • Need a break/close below the 0.7180 (61.8% retracement) to 0.7230 (61.8% expansion) region to bring the downside targets on the radar, with the next hurdle coming in around 0.7090 (78.6% retracement) to 0.7110 (78.6% retracement).

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.