Aussie Still Suffering from European Problems

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The Australian dollar is edging lower, after major fundamental news came out as expected. It’s now hovering over an important support line. Will it continue suffering from global fear?

Australian GDP grew by 0.5% in the first quarter of 2010. This was slightly short of the 0.6% growth rate that was expected. Looking beyond the headline figure, the growth rate for the previous quarter (Q4 of 2009) was revised to the upside, from 0.9% to 1.1%.

So, all in all, the Australian economy continues to boast neat growth, even though the rate hikes took their toll on the speed. Speaking of the rates, Australia central bank decided to leave the Cash Rate unchanged at 4.5%. This followed two surprising rate hikes in previous decisions.

Similar to the GDP release, the rate decision outcome was expected. The focus was on the rate statement. Glenn Stevens’ RBA stated that the rates would stay unchanged in the near term, but didn’t rule out further rate hikes after this “near term”.

Aussie suffers from global fear

While both major events were good, this wasn’t enough for the Aussie. Every day brings more bad news from Europe – more fear. As fear takes over, traders pull out from so called “risky” currencies such as the Aussie. The Australian economy is doing far better than other economies, in all parameters, yet the greenback continues enjoying its safe haven status.

Unemployment rate in the US stands on 9.9%, almost double Australia’s unemployment rate, that stands at 5.3%. This doesn’t matter. Australia enjoys steady growth, as it never experienced a recession. Australia’s interest rate, 4.5%, is higher than all its counterparts. Only now, Canada joined Australia in rate hikes, but th Canadian rate is only 0.5%, after the hike.

AUD/USD approaching the support line

After bouncing off the critical 0.8567 resistance line last week, the Aussie continued losing ground. At first, it lost the 0.8477 support line. An attempt to break higher met resistance and resulted in a new fall.

The important line of support is 0.8240. In the last days, AUD/USD fell twice to 0.8275 and bounced back up. Fear didn’t fully take over. This double bottom could turn into a rebound and to another attempt to rise.

Tomorrow, Australian trade balance will be released. It seems that any small piece of news from Europe has a stronger impact than Australian news these days. If the GDP and the rate decision did little to move the Aussie, trade balance will probably have little impact.

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About Author

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.