AUD outlook remains poor

The Australian dollar (Currency:AUD) is looking strong on Monday morning. News concerning the Chinese financial system has resulted in solid gains being realised by the commodity sector which has in turn benefited the Aussie.

Luc Luyet at MIG Bank says that despite today's advances in the Australian dollar there is a significant degree of pessimism amongst traders towards the currency which could stifle any attempts at a sustained recovery.

This pessimism is clearly expressed via the latest IMM data at hand which shows that Australian dollar short positions were close to record a new historical low.

"We see these levels more as a confirmation of the change in perception in the Aussie than a reason to be contrarian. Indeed, the expected structural peak in mining and the dovish Reserve Bank of Australia do not bode for more than short-term rebounds in AUD/USD," says Luyet.

[The International Monetary Market (IMM) non-commercial positioning is used to visualise the flows of funds from one currency to another. It is usually viewed as a contrarian indicator when it reaches an extreme in positioning].

No bull reversal in the Australian dollar

A recent technical analysis of the Australian dollar / US dollar exchange rate confirms the outlook does not favour the AUD.

Shaun Osborne at TD Securities says the overall trend for AUD-USD remains lower:

"The AUD closed weakly last Friday but saw no additional follow through selling after what had been a sharp and consistent move back from the high 1.05 area since April.

"The AUD has corrected a little higher than we expected this week (we thought 0.9150 would be the maximum) and gains have perhaps done enough to mitigate immediate downside pressure without signalling an all out bull reversal.

"In fact, this week’s range remains well with in last week’s. Consolidates yes, bull reversal no (at least for the moment). Major resistance is 0.9400/05 and the broader trend remains lower below here."

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