AUD/USD unable to rise as strong growth is unbalanced

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As with the release of capital expenditure (when the Aussie rose on a weak headline number), the reaction to Australian data depends on the details and not necessarily on the initial number.

The Australian economy grew by a strong 1.1% in Q1, significantly stronger than 0.9% expected. Year over year, the economy grew by 3.5%, better than 3.2% expected. Nevertheless, am initial rise towards 0.93 was short lived and the pair returned back towards support at 0.9270. Why? The dependency on the mining sector is too blame.

The RBA and the government are looking for a re-balancing of the economy from relying only on the resources sector to other fields, including consumption. And this was weak.

The mining industry contributed around 80% to growth. One of the reasons is that the weather was better than expected during this period, and did not disrupt mining as much as expected.

However, consumer spending rose by only 0.5% contrary to 0.8% expected. Also business investment disappointment with a slide of 1.2%, contrary to an advance of 1.1% expected. All in all, Australian GDP is strong thanks to stronger than expected mining output and despite weakness in other sectors.

AUD/USD rose up to 0.9295 before falling back to 0.9260. It remains supported by 0.9250. For more on the Aussie, see the AUDUSD forecast.

It’s not that the Aussie fell on this news, but it certainly failed to rally on what would usually be considered a positive outcome.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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