The Australian economy grew by 0.9% in the first quarter of 2015. This was better than 0.7% expected. Also year over year, the country down under enjoyed a strong growth rate of 2.3%, higher than 2.1% that was on the cards.
AUD/USD continued its advance from the lows and hit a high of 0.7817, but doubts are creeping in.
Why are there doubts? Well, the details of the report are somewhat less promising for the future. Fixed capital expenditure is actually down 1.2%, and this does not bode well for the next quarter.
In addition, part of this strong GDP growth was boosted by an inventory buildup: and as we know, a replenishing of inventories is often followed by depleting them, so this is another warning sign for growth going forward.
Terms of trade have declined: 2.9% q/q and 11.4% y/y. Wage growth remains weak with a rise of only 0.1%. Also government spending is down.
All in all, there are reasons to be worried that this strong growth rate will not persist. One factor that can improve the situation is a weaker Australian dollar. We are used to hearing complaints about the Aussie’s strength from the central bank, and this time, also the Australian Treasurer Joe Hockey also chimed in by saying it is at a relatively high level.
So, after the run to 0.78, the pair stalled and is still looking for a direction. Resistance awaits at 0.7840, followed by 0.79.
Support is at 0.7750, followed by 0.7675 and then 0.76.