The AUD/USD sold off on Wednesday as the US dollar index (DXY) made a comeback after the latest Australian GDP data. It retreated to a low of 0.6690, which was much lower than this month’s high of 0.6851.
Australia GDP data
The AUD to USD exchange rate erased most of the gains it made last week after Australia published the third-quarter GDP data. According to the Australia Bureau of Statistics (ABS), the economy expanded by 0.6% in Q3 after growing by 0.9% in the previous quarter. This growth translated to a year-on-year expansion of 5.9%. Capital expenditure dropped by 0.2% while final consumption grew by 0.8%.
The AUD/USD price also reacted to the latest China trade data. According to the National Bureau of Statistics (NBS), the country’s exports crashed by 8.7% in November as the country implemented Covid lockdowns, The slump was significantly lower than the expected 3.6%. Imports slumped by 10.6%, leading to the trade surplus narrowing t $69.4 billion. Chinese numbers are important for Australia because of the large trade relationship between the two countries.
The AUD to USD exchange rate also pulled back after the latest Reserve Bank of Australia (RBA) rate decision. On Tuesday, the RBA decided to hike interest rates for the eighth time this year. It raised interest rates by 25 basis points and hinted that more were coming in 2023. Analysts expect that Australia’s rates will peak at about 3.85%.
The Australian dollar also declined after a series of robust American jobs data. The numbers showed that the economy added over 283k jobs in November while the unemployment rate remained at 3.7%. Therefore, as I wrote in this article, analysts expect that the Federal Reserve will push interest rates above 5% in 2023.
AUD/USD forecast
The AUDUSD exchange rate has been in a recovery mode in the past few weeks. In this period, the pair rose to a high of 0.6850, which was the highest level in months. As it rose, it formed what looks like a triple-top pattern. In price action analysis, this pattern is usually a bearish sign. It has now dropped below the 25-day moving average and formed a small bearish flag pattern,
Therefore, the pair will likely continue falling as sellers target the next key support level at 0.6600. The stop-loss for this trade will be at 0.6740.
