THE TAKEAWAY: Australian 1Q GDP > 1.3% q/q, 4.3% y/y > AUDUSD Bullish
What stalling Asian-Oceanic economies? Despite waves of poor data over the past few months suggesting that the Australian economy was going to be hurt by weak demand for her commodities, the first quarter growth reading released tonight has quieted the skeptics – for now. First quarter growth came in at 1.3 percent quarter-over-quarter, well-above the 0.6 percent forecast provided by Bloomberg News. Accordingly, the year-over-year reading at 4.3 percent easily crushed the 3.3 percent forecast.
To put in perspective how massive of a blowout print this was, the forecasts tell it all. With standard deviations of 0.2 percent for each the q/q and y/y readings, the actual 1.3 percent q/q and 4.3 percent y/y readings came in at 3.5 and 5.0 standard deviations above the estimates of 0.6 percent and 3.3 percent. This type of massive blowout on a major data print leads to one thing: exceptional volatility. It is of little surprise then that the Australian Dollar surged by over half of one percent against most of its major counterparts in the minutes following the release.
AUDUSD 1-minute Chart: June 5, 2012
Charts Created using Marketscope – Prepared by Christopher Vecchio
Ahead of the release, the Australian Dollar was already the top performing currency of the day, surging on rumors of fresh Chinese stimulus efforts as well as a report that showed the Federal Reserve was readying more easing measures. The AUDUSD traded close to 0.9770 ahead of the release, but within minutes after rallied to fresh monthly highs – and levels unseen in a week – at 0.9854. Similar Aussie strength was noted across the board, in particular against the Japanese Yen, with the AUDJPY rallying from 76.88 to as high as 77.54, at the time this report was written.
Given this huge upside surprise, alongside the perfect storm for a strong move in higher yielding currencies and risk-correlated assets – Chinese stimulus rumors, Fed easing rumors, and an expected move by the European Central Bank at their meeting on Wednesday – there is some scope for the AUDUSD trade higher at least midway through the European session. Currently, the AUDUSD is trading into former trendline resistance at 0.9845/60. Should the pair post an hourly close above said level, there is room to run up to 0.9880/0.9900, and a daily close above this zone exposes 0.9930 and parity, 1.0000.
--- Written by Christopher Vecchio, Currency Analyst
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