After an encouraging growth in the beginning of the week amid a general weakening of the US dollar, AUD/USD is declining and will likely close the current week in a negative territory. Moody's has downgraded the outlook on the rating of the four largest Australian banks to negative from stable. It has justified this decision by the sluggish growth in profits due to slow wage growth, low interest rates, strong competition and growing household debt.
Since the opening of today's trading day, AUD/USD pair lost nearly 80 points, and the decline continues. Earlier AUD/USD pair rose after better-than-expected employment data in Australia. Unemployment decreased by 0.1% to 5.7%. However, many economists say that the reduction in the number of jobs with full-time employment in July was the largest in nearly three years, which would be a negative factor for the economy and for the Australian currency.
Also, the weakening of the Australian dollar today is supported by the declining oil prices after a three-week growth. Optimistic forecasts of the International Energy Agency (IEA) on the possibility of reducing the excessive world oil reserves as a result of the high demand and the statement by the Minister of Energy of Saudi Arabia Khalid al-Falih that his country is ready to adopt oil market stabilization measures and join the OPEC decisions on freezing levels production, contributed to the rise in oil prices. Oil and gas sector occupies an important place in the economy and exports of Australia, and the Australian dollar reacts quite noticeably to oil price quotations.
Also the issue of the focus of monetary policy the RBA at its further easing is back on the agenda. Australia's central bank lowered the rate to a new record low of 1.5% earlier this month, and many economists expect further rate cuts, which will be negative for the Australian dollar.
According to the minutes of the FOMC published on Wednesday, the Fed did not take on the obligations regarding the rate increase, making it clear that it will depend on the incoming US economic indicators. However, yesterday's statement of the San Francisco Federal Reserve Bank president John Williams that the central bank should start raising interest rates "sooner rather than later", supported the dollar.
Against the background of the expected interest rate increase by the Fed, even closer to the end of the year, caution should be exercised when opening long positions on AUD/USD pair.