AUD USD hits new six year low below 0 7000 target

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.