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Aussie Hit by Weaker Second Quarter GDP

Australia dragged down by weak chinese demand from its mining resources

CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
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The Economic Calendar today kicked off on a sour note with the commodity producing economy growing at half the expected rate of 0.2% in the three months to June.  Australia, which prevented falling into recession even in the depth of the financial crisis, is looking more vulnerable, dragged down by weak Chinese demand from its mining produced resources such as iron ore. 

The AUDUSD responded by falling below 0.70 for the first time since April 2009 making the declines 37% from the intraday high of 1.1080 tested on 27 July 2011. The high yielding currency was a main beneficiary of markets risk appetite for the 3 years after the crisis, with China being the key growth generator of the world’s economy and U.S. launching the QE programs. This is clearly not the case anymore.

Traders now more focused on U.S. data, with Friday’s nonfarm payrolls and wages being catalysts for next moves. Markets are currently pricing a 32% probability for a Fed rate hike in September and an upside surprise in Friday’s economic data will put more pressure on the Aussie.

The Safe Haven Yen Weakens as Asia Stocks Recover

The Yen traded lower against its major counterparties as equities sell off slowed in Asia, Europe opened on a positive note, and U.S. futures indicating a higher opening after steep losses yesterday. The drop in the Japanese currency might be temporary as markets volatility doesn’t seem over yet. The Nikkei 225 ended Wednesday’s session 0.4% lower after trading higher for most of the day, a reverse in European markets direction can’ be rules out, and same for the U.S. However, further drop in USDJPY seen a good midterm opportunity as divergence in monetary policy will continue to support the pair higher.

Sterling Dropping for the 7th Consecutive Day

Despite some relief in latest economic activity from the UK with mortgages yesterday rising to hit their highest levels since February 2014, the pound does not seems to be responding. The GBPUSD seems to be trading more on technicals. As GBPUSD fell below the uptrend started in April this year the pair continued to see more downside potential and is about to test the 50% retracement 1.4563-1.5928 at 1.5245 that could play a good support.

Although the Euro traded lower against the U.S. currency, a reversal in European stocks could support the Euro again as the carry trade currency seems to continue being indirectly correlated with equity markets. 

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CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.