Australia Q4 GDP was stronger than expected, growing 3.1% compared to 1 year ago versus an expectation of 3.0%. Q/Q growth came in at 0.6% as expected, however Q3’s figures are revised higher from 0.5% to 0.7%, which makes the 0.6% even more impressive. RBA rate cut expectations based on Credit Suisse’s OIS is down to 30% following the GDP data, as traders believe the higher GDP results reinforces RBA’s wait-and-see stance announced back in Feb and re-affirmed during yesterday’s rate decision statement.
After breaking above the Kumo and forming a bullish Kumo Twist following the rate decision, AUD/USD didn’t look back and climbed higher. Price has already broken the 1.025 interim before the GDP announcement, and the latest bout of bullish strength will help to cement the 1.025 breakout. However, there is still resistance in the form of previous swing high on 28th Feb just under 1.029. Beyond that, 1.03 round number has also been a strong support/resistance in recent past, and will similarly prevent price from pushing upwards easily.
Price has broken higher from the declining channel despite Ichimoku still showing bearish bias. Stochastic readings suggest that an interim trough is in place and we could see price rallying higher towards current Kumo if Stochastic is proven correct. However, expect the Kumo to provide resistance together with resistance zone 1.035 – 1.04. If price does reach the resistance zone, the likelihood of Stochastic readings hitting Overbought region is high, which will add more weight against a bullish breakout through the Kumo.
Fundamentally, Australia’s economy still remains softer than before. RBA’s statement has indicated to us that investments, both local and foreign have somewhat decreased, which will certainly hamper growth both in mining and non-mining sectors. Australian Deputy Prime Minister Swan echoed the same sentiments today as well, saying that economic conditions are “patchy”. As such, it is hard to envision AUD/USD climbing higher indefinitely. That is not to say that short-term rallies are not possible, as AUD/USD remain a strong commodity currency that is heavily influenced by global bull/bear bias. Yesterday’s historical high for Dow Jones Industrial Average certainly will help in this regard, and could allow AUD/USD to climb further higher should risk sentiment remains bullish from here out.
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