Aussie Lower Ahead of GDP Release
FSM News | Dec 07, 2016 08:57AM ET
Australian Dollar Declined As Demands In Commodity Prices Strengthened.
The Australian dollar slipped overnight as the increasing strength in bulk commodity prices, and an added optimism from the RBA in December, was offset by the strong broad-based US dollar and the widely anticipated weak Australian Q3 GDP report scheduled later today.
However, the Aussie had actually beaten most of its major peers except the Japanese yen.
“AUD/USD remains in much the same trading range it has been in for the past two weeks,” said Joseph Capurso, senior currency strategist at the CBA, citing that the resilience was led by higher commodity prices with the exception of oil.
During Wednesday’s trade in Asia, the released of Australia’s September quarter GDP report gave an impact on the currency.
Australia’s September Quarter
Based on the most recent reports, the Aussie declined after reports claimed that the economy had contracted by a larger-than-expected 0.5 percent in the September quarter.
Meanwhile, the local unit was changing hands at $74.74 cents, down from an earlier reading of $74.51 cents yesterday.
The Australian dollar opened as high as $74.74 cents, but declined shortly after the economic growth figures was released.
The September quarter shrinkage was larger than expected, with an economic estimate of a 0.2 percent contraction in the quarter, according to an AAP survey.
“With the market pricing in the possible adverse outcome, we should expect some reaction to the headline, but the overall risk on this trade remains symmetrical given positioning on the Aussie is light now,” said Stephen Innes, senior currency trader.
Thus, he is expecting the Australian dollar to face weighty influenced by external factors and broader US dollar move.
Aussie Fair Value Rises
The Australian dollar is currently undervalued , but anticipations for an unexpected rally to fair-value could get a bigger picture.
One of several factors is that markets could not properly priced as commodity prices are increasing, said Robert Rennie, FX Strategist.
Industrial metals such as Iron Ore, which is Australia’s single biggest export, have significantly rallied amid heightened demand and low prices given.
“Commodity prices have risen over the course of this year, reflecting both stronger demand and cutbacks in supply in some countries. The higher commodity prices have supported a rise in Australia’s terms of trade, although they remain much lower than they have been in recent years," says Rennie.
Current Stance of AUD/USD Pair
The chart below illustrates AUD/USD price movement amid the weakening Australian dollar, along with the country’s September quarter.
Get The News You Want
Given a bullish tone of the pair, market participants have begun buying the risky currencies as it is widely expected that continued strong demand in commodity prices will give a huge impact on the pair.
Further, the pair tries to break out on the upside through resistance 0.74480 in a light trading volume in today’s session.
Conclusion
As the illustrative chart above shows a bullish tone of the pair, market participants are recommended to still wait on the sidelines as there aren’t any supporting candle present as of writing.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.