TALKING POINTS: AUD/USD, RBA, 2Q GDP, TRADE WARS
- Australian Dollar fell after release of local corporate profits, retail sales, and inventories data
- AUD/USD long-term bearish behavior unlikely to be helped by upcoming RBA rate decision
- Release of second quarter growth figures, developments in US-China trade war in spotlight next
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The Australian Dollar sharply fell against its US namesake after manufacturing, retail, and corporate profits data crossed the wires early into Monday’s Asia Pacific trading session. 2Q corporate profits clocked in at 2.0%, an increase from both economists’ forecasts of 1.3% and the prior 5.9%. Seasonally adjusted inventories for the second quarter decreased to 0.6% from the 0.7% previous, but were still above the 0.2% estimate. August’s monthly retail sales declined to -0.6% from July’s 1.5%.
AUD/USD Chart (5-minute)
Chart prepared in TradingView
The fall in AUD/USD prices maintains the pair’s persistent downtrend channel since February of this year, set to possibly breach December 2016’s low of 0.7160. Recent political turmoil and weakening economic activity have caused the currency pair to tumble recently. However, positive RSI divergence since late June 2018 suggests that downside momentum is waning. This could potentially lead to a consolidation in Aussie Dollar prices, or even a bullish reversal. Whether or not the pair will break the December 2016 low may indicate next moves for traders.
AUD/USD Chart (Daily)
Chart prepared in TradingView
The decline in Aussie Dollar comes ahead of the Reserve Bank of Australia’s September meeting, in which the central bank is widely expected to maintain its overnight cash rate at the record low of 1.50%. The banking institution has consistently promoted a wait-and-see approach to monetary policy and overnight index swaps do not price in at a rate hike for the near-term. RBA Governor Lowe is set to speak following the rate announcement, delivering forward guidance that may cause volatility in the unit, but ultimately any lasting follow-through is unlikely.
Aside from the monetary authority’s decision, the Australian Dollar also faces the release of second quarter year-over-year GDP, which is expected to tick down to 2.8% from the 3.1% previous. In addition, local housing data and July’s trade balance are expected later this week. As for market sentiment, the risk-on unit will be closely watching trade war developments, specifically the $200B in US tariffs on Chinese imports set to take effect on September 5th.
AUD/USD Trading Resources
- Join a free Q&A webinar and have your trading questions answered
- Just getting started? See our beginners’ guide for FX traders
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- See how the Australian Dollar is viewed by the trading community at the DailyFX Sentiment Page
--- Written by Megha Torpunuri, DailyFX Research Team
