The Australian Dollar (AUD) slipped against the U.S. Dollar following the release of weaker-than-expected Gross Domestic Product (GDP) data for Q2 2024. With traders closely watching key economic data and upcoming policy decisions, the currency remains under pressure as markets await further clarity from the Reserve Bank of Australia (RBA) and U.S. Federal Reserve.
Key Takeaways:
AUD slips after weaker-than-expected GDP data, growing just 0.2% in Q2 2024.
Traders are closely watching RBA Governor Michele Bullock's upcoming speech for policy direction.
The AUD/USD pair remains under pressure, breaching key support levels at 0.6700.
U.S. economic data, including ISM Services PMI and Nonfarm Payrolls, could influence Fed rate decisions and the AUD/USD trajectory.
AUD Slips on Disappointing GDP Figures
The Australian Bureau of Statistics (ABS) reported that the country's GDP grew by only 0.2% quarter-on-quarter in Q2 2024, slightly higher than the 0.1% growth recorded in Q1, but falling short of market expectations of a 0.3% increase. The disappointing GDP figures have intensified concerns about Australia’s economic outlook, particularly as GDP contracted on a per capita basis for the sixth consecutive quarter.
This weaker-than-expected growth has caused the AUD to slip against major currencies, particularly the U.S. Dollar (USD). The AUD/USD pair dropped to 0.6700 during early European trading, continuing its downward trend from earlier in the week. With ongoing economic uncertainty and the RBA’s monetary policy in focus, the Australian Dollar’s future direction remains uncertain.
RBA Governor's Speech in Focus
Market participants are now turning their attention to an upcoming speech by RBA Governor Michele Bullock, which is scheduled for Thursday. Traders will be keen to hear the central bank’s perspective on the recent economic data and any insights into potential monetary policy changes. The RBA has maintained a relatively hawkish stance in recent months, but weaker GDP growth may push the central bank to reconsider its position.
Bullock's comments will be crucial in determining the short-term outlook for the AUD, particularly as markets remain uncertain about the pace of rate cuts by the U.S. Federal Reserve. Traders are closely monitoring these developments as they could significantly impact the AUD/USD pair’s trajectory.
Key Technical Levels for AUD/USD
From a technical perspective, the AUD/USD slip has taken the currency pair below key support levels. The AUD/USD has breached the 0.6700 mark, which is now acting as resistance. If the bearish momentum persists, the next downside target could be around 0.66400. On the flip side, a break above 0.6700 could see the pair testing the 0.67550 resistance level, offering some hope for a reversal.
The Moving Average Convergence Divergence (MACD) indicator suggests strong bearish momentum, while the Relative Strength Index (RSI) has dropped below 50, signaling further downside pressure in the short term.
Fed’s Rate Decisions Add to Uncertainty
In addition to the domestic economic challenges, the AUD’s trajectory will also be influenced by the U.S. Federal Reserve's upcoming rate decisions. Markets are pricing in the likelihood of a rate cut in the Fed’s September meeting, with traders expecting a 69% chance of a 25 basis points (bps) cut. Should the Fed take a more dovish stance, it could alleviate some of the pressure on the AUD, providing a potential catalyst for recovery.
However, any stronger-than-expected economic data out of the U.S., such as the ISM Services PMI or Nonfarm Payrolls (NFP) report due later this week, could reinforce expectations of a slower rate cut pace, boosting the USD further and adding to the challenges faced by the AUD.
Conclusion: AUD’s Outlook Hangs in the Balance
The AUD slip following the disappointing GDP data highlights the vulnerability of the Australian economy at this stage. With markets awaiting crucial insights from the RBA and the U.S. Federal Reserve, traders remain cautious. The AUD/USD pair could face further downside pressure if the RBA adopts a more dovish tone or if U.S. economic data strengthens the USD.
For now, all eyes are on RBA Governor Michele Bullock’s speech and key U.S. economic indicators, which will set the tone for the Australian Dollar’s direction in the weeks ahead.
Comments