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Australia’s Q1 GDP showed a 1.1% (versus +0.9% expected) quarter-on-quarter rise and a 3.5% (versus +3.2% expected) year-on-year rise. While this was a ‘surprise’, analysts had already started talking up the GDP reading after yesterday’s better-than-expected current account data. This triggered a rally in the AUD with the local currency gaining ground across the board. AUD/USD came within touching distance of 0.9300 where it had traded towards in overnight trade. Naturally the gains have been capped in this region with some offers starting to come through. There is just no real conviction in risk at the moment and it’s hard to see traders push it much higher. Perhaps once we get the ECB out of the way, that’s when we might start seeing some real moves in the risk space.
USD/JPY at one month high
While focus has been on the AUD, USD/JPY has kept marching higher unnoticed and managed to trade at a one-month high today. As I mentioned yesterday, there was a downtrend resistance line capping gains, which had been in place since April. This downtrend was finally broken this week after a solid move higher for USD/JPY. The pair is trading at 102.70 and is on the verge of testing May highs at 103. Perhaps we might see some resistance in that region. While data is limited on the yen side of the equation, US economic data is set to ramp up over the next few days.
Later today we have the ADP non-farm payrolls, trade balance and the beige book reading. These readings are likely to cause some volatility for the USD as we head towards the non-farm payrolls reading at the end of the week.