AUD/USD – Key Support Holds Despite Subdued GDP Data

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AUD/USD - Key Support Holds Despite Subdued GDP Data

Australia’s GDP growth in the 4th quarter of 2014 was less than impressive, but it was not that disappointing neither. The quarter-to-quarter reading came in at 0.5%, up from the 0.4% print for Q3. Forecasts were more optimistic, calling for a reading around 0.7%.

Australia GDP q/q 
aus gdp q4 2014
(click to enlarge; source: forexfactory.com)

We can see from the chart above that growth has dipped after a good first half of the year. On the year, 2014 saw a 2.5% growth.

Mess Price Action:

The AUD/USD broke above a consolidation resistance at 0.7850 last week, but was rejected at 0.79. This week, price continued to retreat until it hit a common support around 0.7750. With the RBA holding the official cash rate at 2.25% instead of cutting it to 2.00%, the AUD/USD bounced off of this key support but then held below 0.7850. After pulling back, it tested 0.78 after the GDP data – the initial reaction was bearish but it was very brief and became indecisive as the 4H candle corresponding to the GDP release shows.

Here is the official release from the Australian Bureau of Statistics. (AUS Q4 GDP)

AUD/USD 4H Chart 3/4
audusd 4h chart 3/4
(click to enlarge)

The 4H chart shows AUD/USD trying to build a price bottom. Holding below the 200-period SMA and the 0.79 handle last week kept the bullish outlook at bay.

But bears in this market are weak as well, and the price bottom scenario is still in play, especially if price can push above 0.7850 during the 3/4 session. When we look at the daily chart, we see that the market might need price to break above 0.79 to be more convinced of a bullish outlook.

AUD/USD Daily Chart 3/4
audusd daily chart 3/4
(click to enlarge)

Bullish Scenario:

If price does break above 0.79, the first level to monitor for support will be a support/resistance pivot area around 0.8030. If the daily RSI is around and stalls while price also stalls around 0.8030, get ready for a bearish attempt. If then, AUD/USD starts to hold above 0.7850, we can add to the bullish correction scenario, that has the 0.8250-0.83 highs on the year in sight.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.