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Bearish AUDUSD Falls Ahead of China GDP

Technical Bias: Bearish

Key Takeaways:

  • AUDUSD falls below critical 0.82 level, potentially exposing 2015 low of 0.8030.
  • China GDP forecast to grow 7.3 percent YOY in Q4, full-year growth expected to be weakest since 1990.
  • BlackRock Inc. forecasts AUDUSD to fall 15 percent this year, finding a bottom below 70 cents US.

The Australian dollar was back on its heels Tuesday, falling below 82 cents US amid renewed selling pressure leading up to the release of China GDP.

The AUDUSD tumbled 0.23 percent to 0.8183 on Tuesday after declining 0.5 percent the day before. The currency gained some momentum at the end of last week after Australian employment rose faster than forecast in December. The Aussie was trading above 82 cents US last week but was unable to hold gains above that critical level. The AUDUSD faces initial support at 0.8161. A reversal below that level could expose the 2015 low of 0.8030. On the upside, near-term resistance is likely found at 0.8292.

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The bearish outlook on the Australian dollar was ratified last week after BlackRock Inc., an investment management firm, warned of further downside for Aussie dollar. According to BlackRock, the Australian dollar will plunge 15 percent to below 70 cents US this year.

A weak domestic economy, plunging commodity prices and multiple central bank rate cuts are expected to rock the Australian dollar this year. The Reserve Bank of Australia, which successfully “talked down” the Aussie dollar for much of last year, is expected to trim interest rates by 50 basis points in the first half of 2015. Interest rates were left unchanged at a record-low of 2.5 percent throughout 2014 as policymakers implemented a “period of stability” to help boost the local economy.

The Aussie could face bigger declines following disappointing China GDP. According to a median estimate of economists, China’s economy grew at the weakest rate since the global financial crisis. The expected slowdown supports the view the Chinese economy continued to lose momentum amid a string of economic reforms intended to help the world’s second-largest economy transition toward self-sustaining, consumption-oriented growth.

According to forecasts, China’s economy expanded 7.2 percent annually in the fourth quarter, leading to the worst full-year of growth in 24 years. The economy will probably remain under pressure this year, forcing Beijing to cut its annual growth target to 7 percent.

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