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The Australian economy grew by only 0.2% in Q2 2015, worse than +0.4% expected (see our preview) and much lower than 0.9% in Q1.

The immediate reaction was a slip below the very round number of 0.70, for the first time since the financial crisis. While this dip was followed by a bounce back to 0.7020, a follow through seems quite likely.

GDP data

Year over year, the economy grew by 2.2%, worse than 2% predicted. However, there was a sliver lining here, with an upgrade to the previous number from 2.3% to 2.5%.

The weakest link was exports, and China can certainly be blamed for this one. However, more spending by the government and households kept the growth rate at positive levels.

Australian  Treasurer Hockey  doesn’t seem worried as the fall in GDP is “consistent with forecast”. He sees the government’s plans as working.

There is a growing chance that the RBA will cut rates later on and help push the A$ to even lower ground. The  Reserve Bank of Australia did not  change its policy in the most recent meeting and may be waiting for the Fed to act first.

AUD/USD

The low so far has been 0.6981, but 0.70 still provides support. On the upside, 0.7050 works as resistance in case the pair recovers, and this is followed by 0.72 far above.

And where can we look deeper into the downside?  AUD/USD to 0.68 by December – ANZ

Here is how this looks on the chart:

AUDUSD below 70 cents September 2 2015 Australian GDP hits Aussie