The rates continue within a weak uptrend. Both currencies remain weakened under the influence of negative external and internal factors, and this is the way to the formation of a flat trend. In October, we saw a decrease in volatility, although the Australian dollar was able to strengthen slightly against the euro thanks to optimism on the market regarding the trade negotiations between China and the US.
At the end of this week, the level of optimism decreased. As it became known, the APEC summit in Chile, where Donald Trump and the representative of China had to meet, was canceled. Thus, the anticipated new round of negotiations has been delayed. So, again there were doubts about the signing of any deal, given that the processes against Chinese companies in the United States are ongoing, which China naturally disapproves of. As for the macroeconomic reports on the Australian economy, they are slowly improving. In particular, there was growth in the producer price index in the third quarter, for the 11th month in a row, and the sales of new homes recovered after a decline in September.
Reports in Australia aren't always inspiring nowadays, but reports from the eurozone are usually worse, at least this year. At the last meeting of the ECB under the leadership of Mario Draghi, negative trends in the eurozone and the feasibility of reducing the rate to stimulate the economy were noted. However, the regulator did not dare to revise the rate this time, largely because of the change in the ECB leadership, as well as because of the uncertainty with Brexit.
Next week will be key for this currency pair. At the same time, both currencies may be under pressure. A large number of macroeconomic reports are expected to be published, and the RBA will meet in Australia next week. There is every reason to expect a further deterioration in economic indicators in the EU, and as for Australia, the RBA, which cut the rate twice during this year, is likely to refrain from revising the rate this time. On the other hand, setting a new date for a meeting between China and the United States could cause a new wave of optimism on the market - this can be expected in November. Therefore, we believe that the deals to SELL, in favor of the AUD, are the most optimal to date. Most technical analysis tools also indicate the effectiveness of short trades.
