Australian Dollar hits four-month low amid weak GDP data

The Australian dollar fell to a four-month low of 0.6450 against the US dollar on Wednesday, following disappointing GDP data that heightened expectations for potential interest rate cuts by the Reserve Bank of Australia (RBA).

The latest GDP figures revealed that Australia’s economy expanded by only 0.3% quarter-over-quarter in Q3, falling short of the anticipated 0.4% growth. Year-on-year, the growth rate was just 0.8%, significantly below the expected 1.0%. These figures have raised concerns on trading floors about the possible onset of a recession.

Despite the weak GDP report, expectations for the RBA’s upcoming December meeting remain unchanged. The consensus is that the central bank will hold rates steady while continuing to assess economic conditions. However, market sentiment regarding the medium-term monetary policy has shifted slightly, with a 30% likelihood of an RBA rate cut by February. Investors are increasingly betting on the possibility of adjustments by May.

Externally, the Australian dollar is facing additional pressure from a stronger US dollar, which continues to attract investors seeking safe-haven assets amid global economic uncertainties.

Technical analysis of AUD/USD

H4 chart: the AUD/USD pair has reached the target of its recent decline at 0.6490 and is now forming a growth structure towards 0.6480. A broad consolidation range may develop around this level. If the price breaks above this range, a rise to 0.6555 is anticipated. This bullish scenario is supported by the MACD indicator, with its signal line below zero but poised for an upward movement.

H1 chart: the market has nearly reached the primary target of the decline at 0.6490 and is expected to initiate a growth structure to 0.6485. A narrow consolidation range may form, and a breakout above this range could lead to an ascent towards 0.6555, followed by a potential retracement to 0.6480. Once this level is reached, another upward wave towards 0.6700 may be possible. The Stochastic oscillator supports this analysis, with its signal line currently below 20 but expected to climb sharply towards 80, indicating potential for upward momentum.