The AUD/USD experienced slight gains as the US dollar weakened, reaching 0.6720 on Wednesday. This increase followed the release of Australian Q2 GDP data, which met expectations but revealed the economy’s dependence on government spending and subdued private domestic demand. This weakness supports the likelihood of the Reserve Bank of Australia (RBA) easing monetary policy in the near future. Michelle Bullocks will deliver a speech on Thursday.
With the uncertain economic outlook in Australia and the RBA’s proactive stance on monetary policy due to persistent inflation, financial markets are projecting a 0.25% reduction in interest rates by 2024.
Market Update: Australian Dollar Rises on Weak US Jobs Data, Focus on Bullock’s Statements
- Australia’s Q2 GDP growth matched expectations at 0.2% QoQ, with the YoY rate surpassing forecasts at 1.0%.
- Government spending contributed 0.3% to GDP growth, while private sector activity detracted 0.1%.
- Net exports added 0.1% to growth, while inventory destocking reduced it by 0.3%.
- Weaker private demand reinforces expectations for RBA easing later this year, with a potential 25 bps rate cut in 2024.
- US job openings dropped to 7.67 million in July, below the expected 8.1 million.
- The decline in US job openings indicates a cooling labor market, possibly pressuring the Federal Reserve to lower rates.
- Future Fed actions may hinge on Friday’s Nonfarm Payrolls report for August.
AUD/USD Technical Analysis: Signs of Bullish Exhaustion, Weakening Indicators
The AUD/USD pair experienced a mild rise in Wednesday’s session, climbing from Tuesday’s lows in the 0.6680s and approaching the 0.6740 level.
The Relative Strength Index (RSI) retreated from overbought territory, suggesting potential exhaustion in the upward momentum. Additionally, the Moving Average Convergence Divergence (MACD) displayed a red bar, indicating increasing selling pressure.
Decreasing volume in the last two trading sessions may be linked to profit-taking. Support levels to watch if the AUD/USD falls below 0.6700 are 0.6680 and 0.6660, while resistance levels above 0.6760 include 0.6800 and 0.6820.
Australian Dollar FAQs
- The RBA’s interest rate decisions significantly impact the AUD.
- China’s economic health influences the AUD due to trade relations.
- The price of Iron Ore, Australia’s top export, affects the AUD.
- The Trade Balance can strengthen or weaken the AUD.
Understanding the factors affecting the Australian Dollar can help individuals make informed decisions about their finances and investments. Keep an eye on economic indicators and central bank policies to stay ahead in the financial markets.