The Australian dollar made a zig-zag move against the US dollar yesterday after weak economic data was reported from both countries. In the Asian session, the Australian Bureau of Statistics reported lower-than-anticipated GDP data for the third quarter. However, better-than-anticipated services PMI (Purchasing Managers Index) data from China enabled the Aussie to reverse trend.
The Aussie was able to completely regain the lost ground against the greenback after the US ADP job data indicated the lowest private-sector job additions since May 2019. From a high of 0.6854, the AUD/USD pair dropped to a low of 0.6813 before rebounding to 0.6850 levels in the past 24 hours.
The Australian statistical agency stated that the economy grew 0.4% q-o-q in 3Q 2019. Economists had anticipated the economy to grow by 0.5%. However, the June quarter’s GDP growth was upwardly revised to 0.6%, from 0.5%. On a y-o-y basis, the economy grew 1.7% in the September quarter.
The Aussie’s downtrend was further fueled by a decline in the Australian Industry Group Australian Performance of Services Index to 53.7 in November. In the previous month, the index value stood at 55.20.
The uncertainty caused by the US-China trade deal was the main reason for the lower-than-anticipated economic growth in Australia. The Aussie’s decline, however, was limited due to positive economic data from China, which is the largest trading partner of Australia.
The Caixin China Services PMI increased to 53.5 in November, from 51.1 in October. Economists had forecast the index to remain almost unchanged.
The Caixin composite output index increased to 53.20 in November, from 52 in the previous month. New orders, at the composite level, increased at the fastest pace since February 2018. The quantum of fresh orders received from abroad continued to increase across China.
The Aussie’s trend reversal was also aided by abysmal job data released by ADP Research Institute in collaboration with Moody’s Analytics. The report from the payroll processor indicates that the US private sector added only 67,000 jobs in November, compared with 121,000 jobs in the earlier month. Economists had anticipated the private sector to add 137,000 jobs for the reported month.
Ian Shepherdson, a chief economist at Pantheon Macroeconomics, opined that it was “an accident waiting to happen.” The economist also believes that there won’t be a “quick rebound next month.”
Andrew Grantham, an economist at CIBC World Markets, opined that the US economy is signaling a slowdown. Grantham said, “What today’s number does seem to suggest is that underlying momentum in the U.S. economy is slowing, with the 3-month average of the ADP survey pretty consistent with the circa 1% growth rate we are forecasting for fourth-quarter GDP.”
Technically, the AUD/USD pair has bounced off the support at 0.6820. The next resistance is anticipated near 0.6910. Furthermore, the RSI indicator is also in the positive region. Therefore, we are expecting the currency pair to move up further in the short-term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
