The Australian dollar held steady on Monday morning after tumbling more than 1% against the US dollar last week. The release of disappointing local economic data together with improving US ones, encouraged investors to unwind long AUD position.
Firstly, the Reserve Bank of Australia send mixed last week. Although Governor Lowe reiterated that economic growth continued to gradually pick up, he also mentioned that the recent strength of the Aussie could dampen economic growth as well as inflation. This was the first blow for the Aussie. Secondly, September’s retail sales came in well under median forecast, contracting 0.6%m/m compared to +0.3% expected. This was the second blow.
Last Thursday, AUD/USD broke its monthly range to the downside as it moves below 0.7787 (low from July 18th) and is currently trading at around 0.7760. Traders will most likely continue to trim long AUD position as the Fed is expected finally resumed its tightening cycle and start balance sheet reduction. However, with the US closed for Columbus Day, today will be slow and volume are expected to be thin.
By Arnaud Masset