AUDUSD consolidates after RBA now for GDP

As widely anticipated, the RBA earlier this afternoon left interest rates on hold at 0.25%. Buoyed by a successful partial re-opening of the economy and few new Covid-19 cases, the RBA adopted a more positive tone. Attention now turns to the release tomorrow of Australian Q1 GDP.

With a contraction in the June quarter (Q2) already baked into the cake courtesy of the COVID-19 lockdown, a small positive GDP print tomorrow is required to enable the economy to avoid fulfilling the technical definition of a recession and to maintain Australia’s uninterrupted run of no recession since the early 1990s.

Although it now seems like a lifetime ago, there were strong negative forces in motion at the start of Q1, stemming from the bushfire catastrophe. This was later amplified by a sharp drop off from tourism as the pandemic began to spread.

The consensus expectation for tomorrow's number is for a fall of -0.3%. However, the release of the final partials earlier today suggests that a small positive print is not out of the question. Company profits beat expectations as the big miners enjoyed stronger commodity prices and public demand was robust, offsetting a sharp fall in inventories following the panic buying of goods in March.

In some respects, even a small negative print would be considered a satisfactory outcome considering the backdrop outlined above and in comparison to other developed economies who have experienced much larger falls. For example the U.S. -1.2% and Europe -3.8%.

With the market content to look for through the current social and geopolitical unrest and instead focus on a potential global recovery, the AUDUSD can continue to outperform.

Technically yesterday’s break and close above the huge confluence of resistance .6680 area, confirms the idea that the AUDUSD completed a medium-term V-shaped bottom and an Elliott Wave V low at the March .5508 print.

This opens the way for the AUDUSD to move higher, initially the January 2016, .6826 low. Beyond here there is scope for the rally to extend towards .7000c. Within this framework, we favour buying dips back towards support, formerly resistance .6680 area. Keeping in mind that a break and close below .6650 would be initial warning the current rally has lost traction.

Source Tradingview. The figures stated areas of the 2nd of June 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation