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Is it time to sell Aussie?

Friday, Jun 12 2015
There were no major data releases from Australia this morning, with Aussie edging down, currently being traded few points above 0.7720 level. Yesterday's job figures, showed surprising fall in unemployment rate to 6.0%. However, impact of the data was offset by comments earlier in the week by Reserve Bank head Glenn Stevens, indicating he was open to further interest rate cuts.
 
It seems that there are good reasons to start selling the pair now. Firstly, the previously resilient non-mining sector has begun to show signs of weakness, removing one of the hopeful signs that supported the AUD last year. Secondly, perceived risks around Australia’s economy and assets have worsened the outlook for Australia’s risk-adjusted relative returns, especially in an environment of impending US rate rises. 
 
These forward-looking assessments suggest that AUD’s already low weightings in a risk-averse portfolio may fall further. Finally, AUD faces these challenges from a starting point of a 10% overvaluation due to weakening terms of trade and faces still-slowing Chinese demand for Australia’s commodity exports 
 
Pair is likely to continue to consolidate between 0.76 and 0.78 handle so we are far from placing any serious long-term bids. However, on a short-term basis this pair seems to show bearish potential and offers selling opportunity to 0.76 handle. Later today, we can expect more volatility with US PPI and Consumer Sentiment figures.
More in this category: « US retail sales rose by 1.2%, jobless claims still below 300,000 UK Construction Output decreased by 0.8% in April »

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