AUD/USD drops 25+ pips, eases from five-month top, after Australia’s Q1 GDP

AUD/USD declines to 0.6950, still up 0.90% on a day, after Australia’s Q1 GDP matched -0.3% forecasts on early Wednesday. In doing so, the Aussie pair steps back from the five-month high.

Australia’s first quarter (Q1) GDP contracts 0.3% versus +0.5% growth the previous quarter on a QoQ basis. The YoY figures also matched 1.4% market consensus versus 2.2% prior.

Read: Aussie GDP contacts 0.3 PCT QoQ

Even so, the bulls remain hopeful amid broadly positive trading sentiment.  Market’s risk-on sentiment recently got a boost after Axios published the news suggesting US President Donald Trump’s step back from the previous day’s rhetoric to use Federal militaries to stop the protests and looting.

Also favoring the upbeat mood could be the Wal Street Journal’s piece conveying the key US medical officer’s cautious optimism concerning the coronavirus (COVID-19) vaccine.

As a result, the US 10-year Treasury yields gain nearly two basis points (bps) to revisit 0.70% mark whereas stocks in Asia-Pacific also cheer the positivity with green signs.

On the data/event front, Second-tier PMI data from Australia’s AiG and Commonwealth Bank flashed upbeat prints. Further, RBA’s Assistant Governor Michele Bullock spoke nothing relating to the monetary policy during her latest appearance.

Given the recently stellar performance of the AUD/USD pair, traders will keep checking for any negative hints to book the profits. In doing so, the heavy economic line from the US, up for publishing today, will be the key.

In this regard, TD Securities said, “Regional manufacturing surveys, as well as the Markit PMI data, have been showing some fading of weakness in May. The surveys' details have been showing more fading of weakness than the headline data due to a reversal of earlier strength in the deliveries components. Index levels have remained in contraction territory, however. We forecast a modest increase for ISM non-manufacturing to 44.0 from 41.8 in April. Separately, the May ADP employment report is likely to continue showing dramatic weakness in the labor market but to a lesser extent than in April. We forecast an above-consensus 3 million decline.”

Technical analysis

Overbought RSI signals a pullback towards the early-January low near 0.6850, a break of which can recall February tops near 0.6775. However, sustained rise past-0.6900 enables the pair to aim for January 16 top near 0.6935 ahead of targeting 0.7000 round-figure.