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Bearish AUD/USD Trends Remain Intact Following Turnbull Turmoil

Bearish AUD/USD Trends Remain Intact Following Turnbull Turmoil

David Song,
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Australian Dollar Talking Points

AUD/USD appears to be stuck in a narrow range as Malcolm Turnbull gets ousted, with Scott Morrison now set to lead the Liberal party, and the exchange rate may continue to consolidate ahead of the next Reserve Bank of Australia (RBA) meeting on September 4 as the central bank is widely expected to keep the official cash rate (OCR) at the record-low.

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

With Australia slated to hold elections in 2019, political headwinds may continue to drag on AUD/USD as the ongoing shuffle within parliament limits the RBA’s scope to normalize monetary policy.

Image of rba official cash rate

Recent comments from the RBA suggest the central bank will stick to its wait-and-see approach throughout the remainder of the year as ‘there was no strong case for a near-term adjustment in monetary policy,’ and Governor Philip Lowe & Co. may continue to tame bets for higher interest rates as ‘once-off declines in some administered prices in the September quarter are expected to result in headline inflation in 2018 being a little lower than earlier expected.’

With that said, uncertainty surrounding the fiscal outlook paired with the more of the same from Governor Lowe & Co. may continue to sap the appeal of the Australian dollar, and AUD/USD may continue to track the downward trend from earlier this year as market participants push out bets for an RBA rate-hike. 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 may continue to face range-bound conditions following the failed attempt to test the (0.7484), but the broader outlook remains tilted to the downside as both price and the Relative Strength Index (RSI) continue to track the bearish trends from earlier this year.
  • A closing price below the 0.7320 (50% expansion) to 0.7340 (61.8% retracement) region raises the risk for a move back towards the 2018-low (0.7203).
  • Need a 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.