The Australian economy only grew 0.2% q/q last quarter, missing an expected 0.4% expansion and the slowest rate of growth since Q1 2013. A slowdown in China is weighing heavily on Australia’s massive mining base, dragging down exports and limiting overall economic growth. Only household and government spending kept the economy heading in the right direction in Q2.
There’s not much light on the horizon either, with growth expected to remain below trend for the foreseeable future. Businesses are cutting spending and there’s not enough life in non-mining parts of the economy to pick up the slack being left behind by diminishing mining investment, despite a softer exchange rate.
Earlier in the session, AUDUSD dropped below 0.7000 for the first time since April 2009, albeit very briefly. The softer than expected growth numbers pushed the pair back through 0.7000, but bulls rescued it once more. At the time of writing AUDUSD is hovering nervously above 0.7000 as investors eye some more economic data out of Australia and the US, all while monitoring global investor sentiment.
Bulls have pushed EURAUD to its highest level since late 2009, as the latter currency succumbs to weak local and Chinese economic data and fears about global growth. Meanwhile, the euro is benefiting from stability in Europe and the threat of a delayed tightening cycle in the US. So, from a fundamental perspective things are still looking good for EURAUD, especially if AUDUSD finds a new home below 0.7000. From a technical perspective, EURAUD is looking a little oversold in the near-term after bouncing off a resistance zone 1.6150-1.6200.