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 forecastâ€. 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:
