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After Australia's GDP growth in Q2 exceeded forecasts due to an unexpected increase in demand, several other indicators released in recent days have also contributed to a positive outlook. Business conditions rose by 2 points in August and are now close to their long-term average. Business confidence fell by 3 points, but this came after four consecutive months of improvement, and the figure also remains near its long-term average.
Capacity utilization, which was already above average, increased further, and overall conditions have become more positive.
The Westpac Consumer Sentiment Index fell by 3.1% to 95.4 in September. This decrease came after a sustained post-COVID recovery and largely reflects concerns about a possible return of inflation.
The next RBA meeting will be on September 30, and the rate is expected to remain unchanged at 3.6%, as the RBA will likely await updated inflation data. Nevertheless, taking into account the recent economic reports, one can confidently note certain progress, reflected in a moderate improvement in sentiment and GDP growth. If these trends continue—which is most likely—then acceleration of economic growth can be forecast after two more expected rate cuts.
From this perspective, Australia looks more confident than the US, where there are increasing signs of an approaching recession.
The net short position on the AUD has noticeably decreased over the reporting week by $1.14 billion to -$5.39 billion. Positioning remains bearish, but the estimated price is moving upward.
In the previous review, we suggested that AUD/USD would trade in a sideways range, awaiting new data. That held true until the release of the US employment report, which showed that the labor market is stagnating, the economy is slipping into recession, and inflation is set to resume its rise by autumn.
A short-term upward impulse may develop if no new mitigating data arrives before the Fed's meeting on September 17. For now, we assume the likelihood of a breakout above resistance at 0.6628 has increased significantly, and then 0.6650/60—consolidation above this level will markedly improve the technical picture for the Aussie.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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