Australian Dollar Rallies vs Pound Sterling, Euro and US Dollar

The Aus dollar (AUD) has caught a break against a number of key currencies including the US Dollar, Euro and British pound (GBP) at the start of the new week.

The current bounce in the AUD against the USD ultimately goes against the trend, and with no major news to back the AUD gains we reckon we are seeing profit-taking on recent moves.

The US dollar remains supreme at the present time with a surprisingly good employment report putting a rocket against the currency at the close of the previous week. The AUD crumbled as did pretty much every other currency out there.

The Aus dollar rates at the time of this article's last update:

• The British pound to Australian dollar exchange rate (GBP/AUD) is 0.26 pct lower at 1.8305.
• The euro to Australian dollar exchange rate (EUR/AUD) is 0.40 pct lower at 1.4385.
• The Australian dollar to US Dollar rate (AUD/USD) is 0.36 pct higher at 0.8795.

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RBA Still Concerned by Aus Dollar's Value

The October Reserve Bank of Australia meeting saw no changes announced. The press meeting following the meeting was taken as neutral by markets and relief buying of the AUD has ensued.

"There were very few changes to today’s post-meeting statement from the RBA, with the Bank continuing to expect a period of below-trend growth.  The Bank remains concerned about the outlook for China, has lifted its rhetoric on domestic housing slightly, and implicitly continues to look for a further decline in the AUD," says Felicity Emmett at ANZ Research.

Pound Sterling vs Aus Dollar

As the charts show, resistance was met in the mid 1.850's and has proven solid.
Upward momentum does however remain intact from a longer-term perspective and with the weakness seen in the AUD/USD we would expect sterling to eventually regain the initiative.  

That said, nearer-term studies foretell of further declines.

The immediate target for the current downtrend in GBP/AUD appears to be 1.822, the support level that held back in early September.

Successful defence of this level prompted a rally higher towards 1.86; will this be true this time around?

Indeed, daily charts are showing the pound sterling to be oversold against the Australian dollar at the current time; the product's Relative Strength Index is currently reading at below 30.

Any number below 30 indicates oversold conditions - a rebound is the natural resolution to such a scenario.

We do note that the GBP/AUD is below its 20 and 50 day moving averages and its MACD indicator is in negative territory - all signs that further declines are possible from a technical perspective.

Australian Dollar vs the US Dollar: NFP Data Strikes a Blow

The Aussie dollar has succumbed to the bullish US dollar in savage fashion in the closing stages of the week.

AUD/USD crashed lower after the headline non-farm payroll came in at 248K, markets were only expecting 215K. The US Dollar has predictably rallied on the news.

Commenting on the outcome is Joe Manimbo at Western Union:

"The dollar exploded to new 2- and 4-year highs against the euro and a currency basket after an overall solid U.S. jobs report. Nonfarm payrolls jumped 248,000 in September, topping forecasts of 215,000. August got upgraded to 180,000 from 142,000.

"Unemployment sank to a nearly normal 5.9 percent, the lowest in 6 years. Though prettier on the outside, a closer look on the inside of the report showed flat wages and the lowest participation rate (62.7 percent) since 1978. Nevertheless, the market appears to have caught rate hike fever which has powered the dollar stronger across the board and in line for a record 12th straight week of gains versus a currency basket."

Outlook for AUD vs US Dollar

Turning to the forecasts we note the situation facing the AUD/USD has deteriorated sharply.

Support at 0.8760 broke on the release of the payrolls data and this exposed the currency pair to fresh air the most obvious target at this stage appears to be a  drop towards 0.8550.

Outlook for the Euro Against the Aussie

Turning to EUR/AUD we note the outlook looks challenging for the shared currency.

Near-term direction has been pointed lower and we would suggest the clearest path of least resistance in the coming week would be lower in line with recent momentum.

Achieving support at 1.4330 appears to be the most obvious target while 1.4285 could also be hit in coming days provided the negative euro trend remains intact.