Breaking: Australia Q4 GDP beats estimates and supports AUD higher

Australia's Gross Domestic Product has arrived and beat expectations sending AUD marginally higher on the release.  

GDP data

• Australia Q4 Real GDP +0.5 pct QoQ, s/adj (Reuters poll +0.3 pct).
• Australia Q4 Real GDP +2.2 pct YoY, s/adj (Reuters poll +1.9 pct).
• Australia Q4 Final Consumption Expenditure +0.5 pct, s/adj.
• Australia Q4 Gross Fixed Capital Expenditure -1.0 pct, s/adj.
• Australia Q4 Chain Price index -1.2 pct.

AUD/USD reaction

AUD/USD popped to 0.6597 on the knee jerk and extended gains on the 0.66 handle as traders continued to buy the currency. The result is a blessing for committed bulls in an otherwise pessimistic environment. The improvements on the expected result have raised prospects that the economy could be on track towards a 2.3% target, consistent with the RBA’s characterization of a “gentle turning point”. However, in the face of the coronavirus and bushfires, the first quarter data will be more critical and bulls may be hesitant at this juncture. 0.6670 and 0.6700/20 are critical upside targets areas.  

Analysis prior to the event

• Australian GDP Preview: How will GDP impact AUD?

Depending on today's outcome, the levels of interest are seen as 0.6544 and 0.6721 on the wide-based on the volume profiles and points of control of the 28th Feb swing low-post-Fed rate cut rally and the 2020 range respectively. The former has a confluence of a 50% mean reversion of the range while the latter has a 50% mean reversion confluence of the 2020 range. However, the 200 four-hour moving average falls in at 0.6700 and we also see strong support at 0.6670 built up over Feb business, where sellers would be expected to defend shorts in a higher volume node area. To the downside, 0.6540, 0.6510 and 0.6480 are the final supports on the 2020 value range. Should the data come out in line with expectations, we can expect to see some weakness in AUD considering the weakness in the economy. Immediate support comes as 0.6570.

Description

The Gross Domestic Product released by the Australian Bureau of Statistics is a measure of the total value of all goods and services produced by Australia. The GDP is considered as a broad measure of the economic activity and health. A rising trend has a positive effect on the AUD, while a falling trend is seen as negative (or bearish) for the AUD.