AUD/USD hits new six-year low below 0.7000 target
James Chen September 2, 2015 7:42 PM
<p>AUD/USD hit a fresh six-year low below its 0.7000 downside target overnight after Australian Gross Domestic Product (GDP) data for the second quarter showed that […]</p>
AUD/USD hit a fresh six-year low below its 0.7000 downside target overnight after Australian Gross Domestic Product (GDP) data for the second quarter showed that the country experienced its slowest economic growth in over two years. GDP expanded at a rate of only 0.2%, significantly off economists’ consensus forecast of 0.4% and down much further than the previous quarter’s 0.9%. This 0.2% figure for the second quarter represented the lowest growth rate since early 2013.
Coupled with increasing fears over a troubled China economy, this disappointing economic data from Australia helped to spur a plunge for the Australian dollar that has further extended the sharp downtrend that has been in place for more than a year, since the 0.9500-area high in mid-2014.
After hitting a low at 0.6981 during the Asian session on Wednesday, AUD/USD subsequently bounced and pared some of its losses, but was still weighed down by a relatively strong US dollar.
With major data from Australia now having been digested by the currency pair, all attention is now on the US dollar side of the equation and the ever-shifting speculation over the timing of a Fed rate hike. Employment data is a primary variable driving the Fed’s decision.
Data from ADP on Wednesday showed that US job growth in the private sector last month rose above the previous month but was significantly below expectations. Companies added 190,000 jobs in August, falling well under prior expectations of 201,000 jobs. Additionally, July’s numbers were revised down from 185,000 to 177,000. Despite these disappointing numbers, however, job growth was shown to have remained relatively solid, and the US dollar was not appreciably affected to the downside as a result.
The major data release for the US dollar this week is, of course, Friday’s Non-Farm Payrolls and Unemployment Rate reports. These numbers could substantially affect the course of the US dollar and the AUD/USD currency pair.
Better-than-expected data, which could point to an earlier Fed rate hike, should prompt even further losses for AUD/USD below 0.7000, with the next major downside target at the 0.6800 level. Any significantly disappointing data, which could result in a later rate hike, may prompt an AUD/USD bounce from its lows, with key upside resistance around the 0.7200 level.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.