Forex: AUD/USD coughs up 1% on disappointing Australian Q3 GDP

on Dec 4, 2013
Updated: Oct 21, 2019
Listen Wednesday, December 4th:_ The AUD/USD yesterday opened at 0.9113 and then climbed 0.20 percent on the 0.5 percent October expansion in Australian Retail Sales m/m, beating market expectations for 0.4 percent increase. Subsequently the price retraced to an intraday low of 0.9056, helped by the Reserve Bank of Australia keeping the cash rate at its current level of 2.5 percent, as expected.

RBA governor Glenn Stevens reiterated that the Australian dollar was still at uncomfortably high levels and that a lower aussie was a key prerequisite to achieving balanced economic growth.
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From that low at 0.9056, the price yesterday rebounded to reach the day’s peak at 0.9145. The climb wasn’t sustained though, and the pair closed at 0.9130 to score a 0.17 percent gain on the day. The price action formed a hammer candlestick pattern suggesting an eventual upwards movement.

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So far today however, the hammer candle has been manifestly ignored by the market, with the focus exclusively on the Australian Q3 GDP q/q number, released 30 minutes after midnight UTC.
And that number tells of an Australian economy expanding at a slower pace than expected in the third quarter on account of households saving more and spending less. Gross Domestic Product for the third quarter rose by 0.6 percent as compared with the second quarter, when the economy expanded by 0.7 percent. The annualised rate of GDP growth was 2.3 percent.

Q3 thus becomes the third consecutive quarter with annual growth below 2.5 percent and below analyst expectations (in Q3, for a rise of 2.6 percent).
“The data are disappointing,” observe economists at the Royal Bank of Canada in Sydney, who predict that the RBA will cut interest rates in the second quarter of next year.
The RBA has trimmed the benchmark interest rate eight times since 2011 to support an economy hit by a slump in a mining boom that had been the engine of economic growth over the past decades.

Following the release of the GDP reading, the AUD/USD fell one percent to hit an intraday low of 0.9031, its lowest point since 3 September. After modest recovery since then, the pair is currently trading at 0.9036.
The ADP November US Non-Farm Employment Change is due out at 13.15 UTC, to be followed 15 minutes by the US Trade Balance for October.
ISM’s November US Non-Manufacturing PMI is set for release at 15.00 UTC, along with September and October New Home Sales.
Resistances today: 0.9040, 0.9070 and 0.9100.
Supports: 0.9000, 0.8950 and 0.8900.
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