Aussie Slides on GDP Contraction

The Australian dollar plunged sharply in early Wednesday trading plummeting by nearly 100-pips from 0.6380 to 0.6283 following dismal growth data. The report revealed an unexpected contraction in Australia’s GDP for the first time in 8-years, posting a 0.5% decline in Q4 versus calls for a 0.2% increase while edging up by 0.3% from the previous year.

The RBA’s Assistant Governor Edey anticipates short-term weakness and deems Australia’s risk of recession as borderline. The Reserve Bank of Australia surprised markets yesterday by leaving interest rates unchanged at 3.25%, with Bank Governor Stevens saying “the Australian economy has not experienced the sort of large contraction seen elsewhere”.

The Aussie recovered somewhat, recuperating above the 0.63-level to 0.6330. Nonetheless, the AUDUSD pair remains under pressure with support starting at 0.63, followed by 0.6270 and 0.6240. Subsequent floors are eyed at 0.62, backed by 0.6170 and 0.6140. Gains will target interim ceilings at 0.6365, followed by 0.64 and 0.6430. Additional gains will encounter additional resistance at 0.6460, backed by 0.65 and 0.6550.