AUD lost significant momentum against USD today due to a downbeat GDP report and a sharp decline in the housing market. The downbeat data pushed the price below 0.7050 under strong bearish pressure.
The Australian economy contracted sharply. The Reserve Bank of Australia left the official cash rate unchanged at a historical low of 1.75%. The housing market took a downturn which was once booming. The domestic property market is facing troubled time following 27 years of recession-free expansion. According to Governor Philip Lowe, the labor market has become the most important criterion for RBA's monetary policy assessment and further tightening of the labor market cold promote gradual improvement in wages and income.
Today Australian GDP report was published with a decrease to 0.2% from the previous value of 0.3% which was expected to rise to 0.5%. The weak data capped AUD gains.
On the USD side, the US economy is currently quite healthy despite the ongoing trade conflict with China. In January, Fed officials confirmed the intention to pause in the cycle of monetary tigthening. This is viewed as a measure to support the growing economy. Thus, USD gained significant momentum. Recently FED Official Kashkari stated that the US labor market still has some improvements to be done along like an increase in wages. Ahead of NFP reports to be published on Friday this week, USD is expected to trade with higher volatility as the expectations are quite mixed. Today US ADP Non-Farm Employment Change is going to be published which is expected to decrease to 190k from the previous figure of 213k and Trade Balance is also expected to decrease to -57.8B from the previous figure of -49.3B.
Meanwhile, the decline in economic growth and the housing market spoiled the market sentiment on the Australian economy. This is expected to lead to further weakness on the AUD side in the coming days. Any positive data from the US later this week is likely to encourage impulsive gains on the USD side in the coming days.
Now let us look at the technical view. The price is currently trading below 0.7050 area which is also the neckline of the recently formed Head and Shoulders pattern. Currently the price is expected to pull back towards 0.7050 again before pushing below 0.70 and further lower with a target towards 0.6850 support area in the coming days. As the price remains below 0.7000-50 area with a daily close, the bearish bias is expected to continue.
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