Australian Dollar Sold as 1Q GDP Data Disappoints
TAKEAWAY: Australian GDP grew 0.6% q/q in 1Q vs. 0.7% expected > Slower growth hints the RBA may be moved to cut interest rates > AUDUSD Falls
The Australian Dollar fell against its major currency counterparts, dropping to retest the 0.96 figure against its US namesake, after first-quarter Gross Domestic Product figures underperformed economists’ expectations. Output added 0.6 percent in the three months through March compared with the final quarter of 2012, falling short of forecasts calling for a 0.7 percent increase.
The result drove speculation about another interest rate reduction from the Reserve Bank of Australia (RBA) at the July meeting. The central bank said the outlook for inflation afforded “scope for further easing should that be required to support demand” at its latest policy announcement earlier this week. As we discussed in our weekly forecast, central bank policy expectations have been a critical driver of AUD/USD price action, with the pair tracking the Australia-US 10 year bond yield spread.
Sizing up technical positioning, prices are pulling back from resistance at 0.9776, the 23.6% Fibonacci retracement. Near-term support is at 0.9580, marked by the July 2012 low, with a break below that initially eyeing the May 29 swing bottom at 0.9527. Alternatively, a reversal above resistance eyes the 38.2% level at 0.9930.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
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