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The Australian dollar is marching forward against the greenback as the Australian economy rebounded nicely in Q2: the growth rate of 1.2% exceeded expectations for an expansion of 1%.  

AUD/USD is up to 1.0580 from around 1.0540 before the release. In Q1, the Australian economy squeezed by 1.2% according to the initial report. This was now revised to the upside – contraction of only 0.9%.

This was mostly blamed on the Queensland floods, but it also consisted of signs of slowdown, especially in the housing sector. This rebound more than erases the previous contraction.

Not long before the publication, the head of Australia’s central bank, Glenn Stevens, seemed rather optimistic about the Australian economy. He noted that emerging markets are doing quite well. Australia has a lot of trade with Asian countries, especially China.

Yesterday, the RBA decided to leave the interest rate unchanged at 4.75%. There was talk that the global slowdown would force Stevens and his colleagues to cut the rates. This option is still on the cards if the economy deteriorates, but given his upbeat speech and the upbeat data in Q2, the chances are now much lower.

The Aussie began the week with a gap lower against the US dollar. It quickly lost the 1.06 line and only temporarily moved above it. Also now it hesitates towards this line, at least in the initial reaction.

Resistance is found at 1.06 and 1.07. Support for the pair is at 1.0420 and 1.0315. For levels and analysis on this busy week, see the Australian dollar forecast.