AUD/USD remains on the defensive after weak Aussie construction sector data

AUD/USD remains on the back foot near 0.6880 following the release of Australian construction data.
The Construction Work Done (Q1), which directly flows into the GDP, missed estimates, strengthening the case for an RBA rate cut in June.

Omkar Godbole FXStreet Contributor

The AUD/USD pair may have a hard time cheering a potential risk reset in the financial markets, as the Construction Work Done (Q1) - a key metric that flows directly into the GDP - has missed estimates.

The amount of construction work contracted 1.9% in the first three months of 2019, the data released by the Australian Bureau of Statistics soon before press time showed. The markets were expecting no change following a 3.1% drop in the final three months of 2018.

The below-forecast GDP input comes a day after the RBA Governor Lowe almost pre-announced a June rate cut, sending the Australian government bond yields to record lows. The data released today will likely boost the probability of the central bank lowering interest rates next month.

The financial markets, however, have fully priced for the RBA to deliver two 25 basis point rate cuts by November. As a result, the AUD may not suffer big losses during the day ahead due to the weaker-than-expected construction data.

The AUD may even pick up a bid if the oversold Chinese Yuan's starts recovering ground, however, the upside will likely be capped by the strengthening case for an RBA rate cut in June.

As of writing, the AUD/USD is trading at 0.6880, representing marginal losses on the day, having hit a low of 0.6873 a few minutes ago.

Pivot levels

1. R3 0.6984
2. R2 0.6956
3. R1 0.6919
PP 0.6892
1. S1 0.6855
2. S2 0.6828
3. S3 0.6791

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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