August 31, 2021 15:15:13

Overnight, we get the release of the Aussie Q2 GDP print. With today’s net exports disappointing and a worse result than the first quarter, analysts have been downgrading their growth forecasts from the prior consensus estimate of 0.5%. Snap lockdowns are the major factor and an ongoing concern. This means risks remain and are titled to the downside. The latest Covid outbreak is a challenge to the country’s zero tolerance Covid policy. Today’s sharp drop in the China PMI services activity, signalling that the global economic cycle peak is now potentially behind us, is another headwind for AUD.

AUD/USD trying to push higher

Aussie bulls are trying to break north above a confluence of resistance. The 0.73 zone includes trendline resistance from the June highs, the midway point of the Keltner bands and also the 23.6% Fib retracement of the February to August drop just above at 0.7317.  The buyers looked to be in charge at the start of the European session with prices getting back into the late July to August range between 0.73 and 0.74.

But if the 0.73 zone works as resistance, first target below is Friday’s low at 0.7222 with eyes then on the pivot low at 0.7105. More upside will zone in on the 50-day SMA at 0.7383 and then the August high at 0.7426.

AUD/NZD plunges to 16-month lows

There was some head scratching going on this morning as AUD/NZD crashed through long-term support at 1.0418 in the early hours. There were no obvious news catalysts, just a slew of option-related bids at 1.04 as a possible reason. Bearish consolidation had been ongoing in the pair recently with new lows made on Friday at 1.0405.

Today’s plunge made a new low at 1.0345, a level last seen in April 2020. Prices have made a corrective pullback, but the path of least resistance is to the downside, especially if we hold below 1.0405, with targets next around 1.0315. Bulls will need a daily close above the downward sloping trendline from mid-July around 1.0460 to slow the downside.