AUD/USD signal after the strong Australia GDP data

The AUD/USD price held steady on Wednesday morning as the market reflected on the relatively strong Australian GDP and PMI data. It is trading at 0.7145, which is a few points above the overnight low of 0.7063. 

Australia GDP data

The Australian economy started the third quarter well but things changed after it recorded several Covid-19 cases. The lockdowns that ensued helped to drag the country’s economy. 

However, the scale of the weakness was relatively smaller than what most analysts were expecting. In a report today, the Australian Bureau of Statistics (ABS) showed that the country’s economy contracted by 1.9% in the third quarter. 

This decline was worse than the second-quarter expansion of 0.7% but it was better than the median estimate of -2.7%. On a year-on-year basis, the country’s economy expanded by 3.9%, which was better than the median estimate of 3.0%.

The main laggard of the Australian economy was consumer spending, which declined by about 2.4% in the third quarter. This is important since consumer spending is the biggest part of the Australian economy. Capital expenditure rose by 0.2%.

The AUD/USD also held steady after the latest manufacturing PMI data. According to the Australian Industry Group, the country’s manufacturing index rose from 50.4 in October to 54.8 in November. 

Further data by Markit revealed that the PMI increased from 58.2 to 59.2. These numbers provided signals that the country’s economy was doing well.

The strong Australian numbers helped to ameliorate the hawkish statement by the Federal Reserve. The AUDUSD crashed on Tuesday after Jerome Powell warned about tightening. When testifying to Congress, the Fed chair warned that the bank would likely end the quantitative easing (QE) purchases earlier than expected.

AUD/USD forecast

The AUD/USD pair crashed hard after the bullish statement by Jerome Powell. This saw it crash to a low of 0.7064, which was the lowest level since last year. It was also about 6.4% below the highest level this year. 

The pair erased some of those losses after the strong Australia GDP data. It is now attempting to retest the important resistance at 0.7170, which was the lowest level on September 29th. This price action seems like a part of a break and retest pattern. 

Therefore, the pair will likely resume the bearish trend in the first part of the month and then bounce back as investors buy the dips.