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AUD/USD Trading - Q3 GDP contracts - 07 Dec 2016

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AUD/USD Trading chart 07 Dec 2016
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Third quarter Gross Domestic Product in Australia contracted 0.5% unexpectedly

Data from Australia released earlier today showed a surprise disappointment as the third quarter GDP posted a 0.5% contraction. Official data missed forecasts of a 0.2% increase. However, the second quarter GDP figures were revised modestly higher from 0.5% to 0.6%. The Australian dollar was weaker on the news, which comes just a day after the Reserve Bank of Australia opted to keep the overnight cash rate unchanged at 1.50%, while signaling that policymakers will be waiting for more economic data before making changes to its monetary policy.

The quarterly GDP data pushed Australia's annual GDP rate to 1.8%, missing forecasts of 2.2% increase. In the second quarter, the annual GDP rate was registered at 3.3%.

After the recently concluded RBA meeting which left many experts to believe that interest rates will remain unchanged, the latest GDP figures is likely to put a dent to this basis with expectations now starting to slowly rise towards further rate cuts this coming year.

The Australian dollar is seen to be currently consolidating into a bearish flag pattern on the daily chart. Prices initially posted a low at 0.7339 on 18th November, following which prices have been pushing higher.

With support at 0.7339, a break down here could send the Aussie towards 0.7225 - 0.7183 support level, last tested around May this year. This potentially indicates continued declines in the AUD/USD.

How to trade binary

AUDUSD is currently seen attempting to retest the resistance level near 0.7450 - 0.7430. A short term attempt here could see a reversal near this resistance zone which could eventually lead to a break down in prices.

The next main lower support is seen at 0.7380, which could be tested in the near term. Therefore, look to purchase PUT options near 0.7450 - 0.7430 resistance level for a 21:00 GMT expiry time.

In the near term, the U.S. dollar strength is likely to persist ahead of next week’s all important FOMC decision where the markets are strongly in agreement for a rate hike in almost a year. This will keep the Australian dollar pressured to the downside as a result.

Asset: AUD/USD
Direction: Put
Target price: 0.7450
Expiry: 21:00 GMT

Disclaimer: The article is written for informative purposes only and it is not financial advice. The author does not have any position in the currency pairs mentioned, and no plans to initiate a position. He wrote the article himself and expressed his own opinions. He has no business nor personal relationships with any mentioned government entities or stocks. Readers should not treat any opinion expressed by the author as a specific inducement to make a particular trade or follow a particular strategy, but only as an expression of his opinion.

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