The Australian GDP growth data released on Wednesday supported buyers of the AUD/USD pair. After a sharp, impulsive decline to 0.6486, the pair returned to the 0.65 area. Although it is still too early to discuss the renewal of a northern (bullish) trend, the report presents a "serious bid to win." This release should be considered in light of July's CPI growth, which reflected an acceleration in monthly inflation. The final piece before September's Reserve Bank of Australia meeting is the Australian labor market report, which will be released in two weeks. If the "Australian Nonfarm" data also falls in the green zone, the probability of a rate cut at the September meeting drops to zero. The prospects for additional monetary easing this year would also be in doubt. At this time, the situation is not in favor of the "doves," which is keeping the Australian dollar afloat.
Let's return to the Australian economy indicators. According to the published data, GDP for the second quarter grew by 1.8% year-over-year, while most analysts forecasted 1.6% y/y (after 1.4% growth in the previous quarter). The economy has grown for a third consecutive quarter (for comparison: in Q3 2024, GDP grew by just 0.8%). On a quarterly basis, the Australian economy grew by 0.6% (forecast was 0.5%) after weak growth of 0.3% in the previous quarter.
The key growth driver in Australia's GDP in the second quarter was consumer spending. Households increased expenditures by 0.9%, with discretionary ("non-essential") spending up by 1.4%. It's also worth noting that mining sector production jumped by 2.3% q/q, thanks to a sharp decline in the first quarter due to weather-related factors.
However, the report also revealed some negative signals. For example, investment activity remains weak—both in the public and private sectors. Private investment volume rose by only 0.1%. Meanwhile, public investment declined again: this time by 3.9%. This figure has been negative for the third consecutive quarter (for example, in Q1, government investment fell by 2.4%), reflecting the worst state since the end of 2017. This situation arose due to cuts in healthcare/medical projects, the transport sector, and decreased defense investments.
Nevertheless, the report worked in favor of the Aussie. Australia's economy has been in positive territory for 15 consecutive quarters, demonstrating positive real GDP dynamics. Although Q2 growth rates could have been better, headline results landed in the "green zone," and growth was mainly driven by domestic demand.
As mentioned above, this report should be viewed through the lens of the latest Australian inflation data. Recall, the July consumer price index accelerated to 2.8% after slowing to 1.9% in June. Most analysts predicted a more modest rise—to 2.3%. July saw the strongest monthly inflation growth since July 2024. Moreover, CPI growth was not only due to higher electricity costs. Other factors contributed—alcohol and tobacco rose by 6.5%, housing services by 3.6%, food and non-alcoholic beverages by 3.0%. Core (trimmed mean) inflation rose to 2.5% from 2.1% the previous month. And CPI excluding volatile categories (vegetables, fruit, fuel) and tourism jumped to 3.2% (a yearly high). This indicates broad inflationary pressure.
All this suggests that the likelihood of an RBA rate cut in September is close to zero. Only the Australian jobs report can change the situation—but only if the August release is not just weak, but catastrophically bad (which is unlikely).
Thus, the fundamental background favors further growth for AUD/USD, all the more so as the US dollar on Wednesday came under additional pressure following the JOLTS data (number of private sector job openings at the end of the reporting month). While this is a relatively "sluggish" and lagging indicator, it is closely watched by market participants—especially when it signals a rising/falling trend. For now, the trend is downward: the figure declined for the second month in a row, and at a brisk pace. July JOLTS, for example, came in at 7.18 million (the lowest since March 2021), compared to a forecast of 7.39 million. This is a disappointing result ahead of Friday's Nonfarm Payrolls and in the context of the weak ISM Manufacturing Index, which remained in contraction territory in August (48.7).
Given the current fundamental setup for AUD/USD, long positions remain a priority—downward impulses are best used to open longs.
From a technical standpoint, on the H4 chart, AUD/USD is again between the mid and upper lines of the Bollinger Bands, and also above all lines of the Ichimoku indicator. On the daily chart, the price has also left the Kumo cloud and is between the mid and upper lines of the Bollinger Bands—all of these points to long positions as a priority. The first and so far only target is 0.6580. This price level coincides with both the upper Bollinger Band on the four-hour chart and the upper Bollinger Band on the D1 timeframe.
