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Australian Dollar Steady on Credit Data, Looks to RBA Next Week

Australian Dollar Steady on Credit Data, Looks to RBA Next Week

David Cottle, Analyst


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Australian Dollar Talking Points:

  • Australian private sector credit expanded modestly in August
  • The Australian Dollar didn’t move much. That market’s focus is overseas at the moment
  • That could change next week when the RBA announces monetary policy

Find out what retail foreign exchange traders make of the Australian Dollar’s chances right now at the DailyFX Sentiment Page.

There wasn’t much for Australian Dollar traders in Friday’s news of a modest rise in private sector borrowing, but the coming week could offer them a little more.

Private sector credit rose by 4.5% on the year in August, according to official figures. That was better than both the 4.3% forecast and the 4.4% record in July. Both credit for housing purposes and credit for business use did slightly better than expected too, for an overall report which was above expectations.

However, the Australian Dollar is more in thrall to external factors now. Beyond the two key national protagonists in the US/China trade spat Australia is arguably the country likely to be most affected by it, reliant as it is on China for so much raw-material trade and the US for security.

Next Tuesday will bring October’s monetary policy decision from the Reserve Bank of Australia, with its accompanying statement eagerly awaited. The central bank has chosen to highlight high consumer debt in recent commentary. The RBA worries that this burden complicates its monetary mandate by making the prospective hit from higher rates on the consumer harder than it would otherwise be.

Investors will also get a look at Australian retail sales and its various Purchasing Managers Indexes.

On its daily candlestick chart, AUD/USD remains in the long, broad downtrend channel, which has defined trade all year. The interest-rate gap in the US Dollar’s favor has clearly the main driver of this Aussie weakness. Moreover, with US rates apparently set to go on rising, while Australia’s could be on hold at record lows for all of 2020, it seems unlikely that the pair is going to turn anytime soon.

Australian Dollar vs US Dollar chart - daily

The RBA’s inflation take could be key, however. Consumer price rises have been stickily low but inflation is now back within the central bank’s target band.

AUD/USD has clearly just failed once again at that channel top, but it remains a long way from the base. With the Australian economy not doing badly by most counts, notably both growth and job creation, it may well range trade between current levels and the previous low.

That was the 0.7076 made on September 11.

AUD/USD Trading Resources

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!

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