Is AUD/USD set to surge with upcoming GDP reports?

AUD/USD locks in a second week of gains

AUD/USD finished higher last week at 0.6514 (0.21%), marking a second week of gains. The rally was supported by hawkish Reserve Bank of Australia (RBA) communications and President-elect Trump's selection of Scott Bessent as Treasury secretary.

RBA's hawkish stance and economic indicators

In a speech to the Committee for Economic Development of Australia last Thursday night, RBA Governor Michele Bullock struck a hawkish tone, noting that 'underlying inflation is still too high to be considering lowering the cash interest rate target in the near term.'

The RBA Governor emphasised that while inflation and labour market data are important, they are backward-looking. The Board will closely monitor upcoming surveys, with particular attention on the National Australia Bank (NAB) Business Confidence and Westpac Consumer Confidence surveys in the months ahead.

US Treasury leadership and its impacts

In the United States (US), Bessent's selection as the United States Treasury Secretary was initially well-received, leading to a weaker US dollar. This suggested a moderation of Trump's aggressive tariff policies and a commitment to reducing the US deficit to 3% of gross domestic product (GDP). However, Trump's social media comments about tariffs last Tuesday have somewhat tempered that sentiment.

GDP outlook for Q3

Date: Wednesday, 4 December at 11.30am AEDT

Australian GDP increased by 0.2% in the second quarter (Q2) this year, for an annual rate of 1.0%. While the Australian economy grew for an 11th consecutive quarter, excluding the Covid-19 pandemic period, it was the lowest growth rate since 1991 – 1992.

The current slow pace of economic growth in Australia is an unpleasant side effect of restrictive monetary policy, as the RBA continues to attempt to rebalance demand and supply to cool stubborn inflation.

Looking ahead to third quarter (Q3) GDP, the market consensus anticipates a 0.5% rise, which would see the annual growth rate remain soft at 1% year-on-year (YoY). Despite expectations of another slow quarter of growth, the interest rate market is not anticipating a first 25 basis point (bp) RBA rate cut until May 2025.

AU GDP annual growth rate chart

AUD/USD technical analysis

AUD/USD rejected multi-month downtrend resistance at 0.6900 – 0.6910 in late September, coming from the 0.8007 high of February 2021 and the 1.1081 high from July 2011.

At its 0.6432 low last week, it was close to multi-month trend line support at 0.6360 – 0.6350.

AUD/USD weekly chart

From its late September high of 0.6942 to last week's low of 0.6432, AUD/USD has fallen 7.32% over a nine-week period.

Although AUD/USD is currently oversold and the relative strength index (RSI) indicator is displaying bullish divergence, we view any potential bounces as corrective or countertrend.

To shift to a more neutral outlook and reduce downside risks, a sustained move above the resistance from last week's high of 0.6550 and then above the 200-day moving average at 0.6630 is essential.

AUD/USD daily chart

• _{Source: TradingView. The figures stated are as of 2 December 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}