Australian Q4 GDP came in at 0.2% below the 0.5% expected. The RBA forecast was 0.6%, which indicates that they may be out of touch with the reality on the ground. Overnight RBA Governor Dr. Lowe maintained that there are plausible scenarios where rates may go up or down. However, odds for a rate cut in October jumped to 67.7% following the GDP release. We have noted previously that Nomura and Westpac are calling for 2 cuts this year. They have now been joined by Macquarie Bank and AMP who forecast a 50 bps rate cute before year end i.e. 2 cuts of 25bps each.
The below is the daily chart of AUDUSD. Following the 4Q GDP miss and further to our previous article, price has broken below the previous trough (green horizontal). I.e. the chart shows a lower peak followed by a lower trough which is the classical definition of a downtrend. Moreover, the daily RSI(9) (a measurment of the internal strenght of a number series) is below 50 and indicative of an underlying bearish momentum.
The below is the weekly chart of AUDUSD. The longer term timeframe is generally reflective of the underlying economic fundamentals. We note that the EMAs are in a bearish stack. I.e. the green 5-week EMA is below the orange 13-week EMA, and the orange 13-week EMA is below the black 34-week EMA. The RSI(9) is also below 50 and indicative of an underlying bearish momentum. The EMAs are also starting to show angle and separation which is due to a recent acceleration in the weekly downside momentum.