Aussie Keeps Rising Momentum Following Release of GDP
By: Eddy Peng Jun 7, 2017
The Australian dollar rallied for a third straight day against the U.S. dollar on Tuesday after failing to test the yearly low found at 0.73284. The Aussie was making a more meaningful attempt to break out of the downward trending channel carried over from March with sharp gains in past three days. Today’s release of high important data of Australian Gross Domestic Product is fuelling its momentum.
The Reserve Bank of Australia shrugged off a likely slowdown in the economy when it announced its benchmark interest rate remained unchanged for the 10th straight month on Tuesday, which came a day before the first-quarter GDP report. Economists expected a growth of only 0.3 percent, while some even forecasted a contraction for the three months.
Australia’s economic growth slows to 0.3 percent in the first quarter, which was just released this morning, constrained by weak net exports, retail sales and a drop in housing investment, while public spending and strong company profits helped bolster the slowdown economy.
Despite the limited market reaction to the RBA interest rate decision and the confirmation of economic slowdown after GDP released, the 1Q Gross Domestic Product (GDP) is matching the expectation and fuelling energy to further increase in the Aussie dollar in the near term.
“My sense is they’re not going to cut interest rates unless something particularly severe happens,” said Paul Dales, chief economist for Australia and New Zealand at Capital Economics. He said the potential triggers were “either the unemployment rate rising some way above 6 percent, underlying inflation falling back towards 1.5 percent or two consecutive quarters of negative growth, which is possible but not within my forecast.”
On the global outlook, Governor Philip Lowe said growth in Australia’s top trading partner China was being supported by increased spending on infrastructure and construction, but repeated his warning that high levels of debt continued to present a medium-term risk.
Technically the higher breakout of the downward trending channel helped the AUD/USD reverse from the relative bottom level and the next breakout of a key resistance found at May 23th’s high (0.75171) would boost further rise in the short term.
Broader outlook for the AUD/USD remains in the upside by looking at the rising Relative Strength Index (RSI). Investors should keep a close eye on its moving in these two days. If it fails to break to the upper channel (50% retracement), traders may watch for its halt in bullish market.
Chart 1: AUDUSD Daily
Thank you for inquiry ACY.
Your application has been received, and we will arrange an account manager within 24 hours to contact you! We wish you have pleasant trading experience!
