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Analysts at MUFG Bank, consider the AUD/USD pair is moving toward October lows. They point out external risks have shifted more to the downside.  

Key Quotes:

“The AUD/USD rate failed to break above resistance from its 200-day moving average earlier this month at around 0.6950 and has since fallen back below the 0.6800-level, and is moving back towards the start of October low at 0.6671. The initial optimism which greeted progress towards a US-China phase one trade deal has started to wear off. There have been conflicting reports over how talks are progressing, but the risk is rising that a deal may not be reached before the end of this year which would disappoint market expectations. At the same time, the global economic data flow has continued disappoint expectations. As a result, the balance of external risks for the AUD has shifted more to the downside. The domestic data flow from Australia has also been disappointing especially the latest labour market report for October.”

“Rising spare capacity and subdued wage growth are keeping pressure on the RBA to deliver further monetary easing. The rate market currently expects the RBA to wait until early next year to deliver another rate cut rather than pulling the trigger as soon as next month to allow more time to assess the impact of current easing. Room for rate cuts is fast running out though, and market expectations are already building for unconventional easing in 2020.”

“We expect the AUD to continue to weaken in the near-term driven in part by more investor caution over the outlook for global growth, and building expectations for further RBA easing. A move back towards the October low for the AUD/USD rate at 0.6671 is already underway. Any positive US-China trade deal headlines pose the main upside risk.”