AUD/USD pauses RBA-led rally below 0.6700 as Australia Q1 GDP disappoints, China trade data eyed

AUD/USD reverses from the highest levels in three weeks after Australia’s first quarter (Q1) Gross Domestic Product (GDP) print a downbeat outcome early Wednesday. In doing so, the Aussie pair trims the Reserve Bank of Australia’s (RBA) led gains to 0.6675 by staying mildly bid, despite the latest fall, amid a sluggish session.

That said, Aussie Q1 GDP rose 0.2% QoQ compared to 0.5% previous readings and 0.3% market forecasts. On the same line, the yearly GDP came in as 2.3% versus the analysts’ estimation of 2.4% YoY and 2.7% previous readings.

Also read: Aussie Gross Domestic Product (Q1): Miss by 0.1% QoQ and YoY, AUD/USD in 15 pip rangesteady

RBA Governor Philip Lowe signaled further rate hikes from the Aussie central bank and propelled the five-day uptrend of the Aussie pair. That said, the policymaker said, “Some further tightening of monetary policy may be required, depending on how economy and inflation evolve.” It should be known that the RBA surprised markets for the second time in a row by announcing a 25 basis points (bps) rate hike on Tuesday.

Also read: RBA’s Lowe: Too early to declare victory in the battle against inflation

While the Aussie GDP fails to tame the RBA-inspired optimism for the AUD/USD buyers, the softer US Dollar adds strength to the pair’s upside momentum.

US Dollar Index (DXY) reverses the previous day’s corrective bounce while taking offers around 104.00, down 0.10% on a day by the press time. In doing so, the greenback’s gauge versus six major currencies suffers from downbeat market bets on the Fed’s next move. That said, the interest rate futures show a nearly 15% probability of a June rate hike. The reason could be linked to downbeat United States activity data released on Monday, as well as the previously dovish comments from the Federal Reserve (Fed) Officials ahead of the pre-Fed blackout.

Additionally favoring the AUD/USD bulls could be the cautious optimism in the markets, as portrayed by the mildly bid US stock futures and sluggish Treasury bond yields.

Having witnessed the initial market reaction to the Aussie Q1 GDP, AUD/USD pair traders should wait for China trade numbers for April for clear directions. However, the bulls are likely to keep the reins amid the latest RBA versus Fed divergence.

Technical analysis

Although, an upside break of the previous support line stretched from early March, around 0.6620 by the press time, joins successful trading beyond the 50-DMA level surrounding 0.6665 to favor the AUD/USD bulls, the 200-DMA hurdle of near the 0.6700 threshold caps the Aussie pair’s run-up.