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Trading the News: Australia Gross Domestic Product (GDP)

Updates to Australia’s Gross Domestic Product (GDP) report may spark a bullish reaction in AUD/USD as the growth rate is expected to pick up to an annualized 2.7% from 2.4% during the last three-months of 2017.

Image of DailyFX economic calendar

Even though the Reserve Bank of Australia (RBA) keeps the cash rate at the record-low in June, signs of stronger growth may encourage Governor Philip Lowe and Co. to gradually alter the monetary policy outlook over the coming months as ‘members agreed that it was more likely that the next move in the cash rate would be up, rather than down.’

As a result, a positive development may heighten the appeal of the Australian dollar as it puts pressure on the RBA to raise the official cash rate (OCR) off of the record-low, but a below-forecast GDP print may fuel the recent pullback in the exchange rate as market participants scale back bets for a rate-hike in 2018. Sign up and join DailyFX Currency Analyst David Song LIVE for a broader discussion on current themes and potential trade setups!

Impact that Australia GDP report had on AUD/USD during the previous quarter

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

4Q

2017

03/07/2018 00:30:00 GMT

2.5%

2.4%

+20

+42

4Q 2017Reserve Bank of Australia (RBA) Interest Rate Decision

AUD/USD 15-Minute Chart

Image of AUDUSD 5-minute chart

Economic activity in Australia slowed more-than-expected during the last four-months of 2017, with the growth rate narrowing to an annualized 2.4% from a revised 2.9% in the third-quarter. A deeper look at the report showed household consumption increasing 0.6%in the fourth quarter, with government spending climbing 0.3% during the same period, while private investments narrowed 0.4% after rising 1.0% in the three months through September.

Despite the below-forecast print, the Australian dollar gained ground throughout the day, with the pair closing at 0.7823. Learn more with the DailyFX Advanced Guide for Trading the News.

AUD/USD Daily Chart

Image of AUDUSD daily chart
  • Failed attempts to close above the 0.7650 (38.2% retracement) hurdle may generate range-bound conditions in AUD/USD, but recent developments in the Relative Strength Index (RSI) instills a constructive outlook for the pair as the oscillator continues to track the bullish formation carried over from the previous month.
  • Need a closing price above 0.7650 (38.2% retracement) to open up the Fibonacci overlap around 0.7720 (23.6% retracement) to 0.7770 (61.8% expansion), with the next region of interest coming in around 0.7930 (50% retracement) to 0.7940 (61.8% retracement), which sits just above the March-high (0.7916).

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide!

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader series on how to effectively use leverage along with other best practices that any trader can follow.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.