The Australian dollar has extended its gains and is in positive territory on Wednesday. Currently, AUD/USD is trading at 0.7359, up 0.60% on the day. The pair is currently at its highest level in two weeks.
Australia GDP is better than expected
Australia’s economy rose 0.7% in the second quarter. This was significantly below the Q1 gain of 1.9%, but beat the consensus of 0.5%. Investors reacted positively to the release and the Australian dollar is up considerably on Wednesday. However, Australia continues to grapple with Covid-19, and earlier today the government extended the lockdown in Melbourne for another three weeks.
With most Australians not fully vaccinated, the government has used lockdowns as its primary tool to contain the pandemic. Sydney, for example, has been in lockdown since late June). However, the prolonged lockdowns have been deeply unpopular and have taken a toll on the economy, in particular the services sector. The impact of the recent lockdowns will only be reflected in the Q3 GDP report, and this could mean that the economy will contract in the third quarter.
The markets have shifted their attention to US employment data. The ADP Employment report earlier today was much weaker than expected – the read of 374 was well off the consensus of 613 thousand. The weak reading is a cause for concern, but it should be remembered that the ADP release is not a reliable indicator of the NFP which follows on Friday, so the market reaction has been muted. The estimate for NFP is around 750 thousand, and if the reading is much lower than expected, the dollar will likely lose ground.
AUD/USD Technical
- On the upside, 0.7377 is under pressure as AUD/USD is up sharply on Wednesday. Next, there is resistance at 0.7455
- There are support levels at 0.7162 and 0.7055
