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  • Australia’s Q2 GDP matched market consensus on quarterly as well as on a yearly basis while rising 0.5% and 1.4% respectively during Q2 2019.
  • Risk tone little changed amid downbeat economics, absence of major trade/political catalysts.
  • RBA downgraded growth forecasts, stood ready for further rate cuts if needed.

AUD/JPY rises to the highest since August 27 after Australia’s upbeat GDP numbers pleased the AUD buyers. The quote currently takes the bids to 71.88 by the press time of early Wednesday.

Australia’s second quarter (Q2) 2019 gross domestic product (GDP) matched expectations of 0.5% and 1.4% growth numbers respectively on QoQ and YoY basis versus 0.4% and 1.8% earlier in the same order. Even if the AUD/JPY surged post-release, it should be noted that the growth figures are below the RBA’s August month forecast of +0.8% QoQ and 1.7% YoY.

In its latest monetary policy statement, the Reserve Bank of Australia (RBA) keeps highlighting fears of downside risk to the economy while also showing readiness to announce further rate cuts, if needed. However, the Australian Dollar (AUD) buyers mainly concentrated on the absence strong clues concerning the RBA’s immediate rate cut as a positive sign.

Risk sentiment shows no reaction to the record low business activity numbers from Hong Kong and Japan. One probable reason for the same could be traders’ wait for more clearance on the US-China trade meeting that has been up for September without any clear dates. Additionally, votes in favor of the motion receding fears of no-deal Brexit at the United Kingdom’s (UK) parliament also contributes to the market’s risk-tone.

Global risk indicator, the US 10-year treasury yield, flashes no change to the previous day’s close near 1.47%.

While China’s Caixin Sevices Purchasing Managers’ Index (PMI) for August will act as an immediate catalyst, investors will seek fresh clues from trade/political headlines to determine near-term pair momentum.

Technical Analysis

A sustained break above 21-day simple moving average (DMA) level of 71.76 can escalate the pair’s run-up towards a one-month-old falling trend-line, at 72.33 now, until then 71.00 and recent low near 70.00 will keep luring bears.