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Australian Dollar Forecast: AUD/USD Whipsaws on Upbeat AU GDP Print

Australian Dollar Forecast: AUD/USD Whipsaws on Upbeat AU GDP Print

Thomas Westwater, Contributor

AUD/USD, Australian GDP, Sentiment – Talking Points

  • Australia’s Q3 GDP growth rate crosses the wire at 3.3% QoQ
  • AUD/USD moved higher but reaction appears underwhelming
  • Annual growth still down by 3.8% following Covid calamity
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The Australian economy grew at a quarterly rate of 3.3% according to the latest GDP report from the Australian Bureau of Statistics (ABS). Economists expected a 2.6% growth rate according to the DailyFX Economic Calendar. AUD/USD saw a positive but underwhelming reaction given the solid bounce in economic activity and is now giving back its post-GDP report gains.

AUD/USD 5-Min Chart

AUDUSD Chart

Chart created with TradingView

The recovery in economic activity likely owes to the fact that Australia has rolled back Covid-induced restrictions across most of the country. While the lift in activity in Q3 is encouraging, pre-pandemic levels are still a way off. Still, the report is a positive sign for Australia’s economy. The rise in GDP reflects a sharp rise in domestic demand, household consumption, and, to a smaller extent, public demand according to the ABS.

Australian GDP Growth Quarterly

AUD GDP Q3

Source: BBG

Household spending saw a swift recovery, rising 7.9% after a record 12.5% drop in Q2. The rise in household consumption is encouraging. However, Melbourne’s relatively longer lockdowns from Covid hampered the overall growth. Victoria state was the only Australian state to see a drop in household consumption through Q3.

Overall, the upbeat economic data will likely further the resolve of the RBA to hold policy in its current stance. That said, the Australian Dollar may continue to see near-term strength, underpinned by the less dovish RBA expectations. In reality, however, Covid may see another surge before widespread vaccine distribution is achieved. For now though, the recovery outlook is clearing and outside any surprises in the trend of Covid, the current path appears to be the most likely.

AUD/USD remains slightly below the 2020 high set back in August. Market sentiment has improved recently, but the Aussie-Dollar needs to overtake the key technical level before seeking new ground higher. To the downside, the 0.7300 psychological level looks to support any shift lower. A consolidation phase with sideways price action remains possible regardless of improved sentiment, however.

AUD/USD Daily Chart

AUDUSD Daily Price Chart

Chart created with TradingView

AUD/USD TRADING RESOURCES

--- Written by Thomas Westwater, Analyst for DailyFX.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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