The Australian dollar suffered overnight as optimism surrounding the US-China G20 agreement faded. The Aussie initially looked like testing the elusive 0.74 handle in Asian trading, touching its highest level since august at 0.7394 before deteriorations in risk sentiment forced the domestic unit lower in line with global equity markets. This was partly due to tweets by US president Trump reaffirming his preference for trade tariffs and ultimately casting further doubt on the US-China trade truce. This saw the Aussie fall to levels nearer to 0.7330 with the AUD/NZD cross also retreating 30 points to 1.0590 as New Zealand dairy auctions met expectations.
Recapping yesterday’s domestic data releases, Q3 current accounts numbers showed a deficit of -10.7bn versus an expectation of -10.2bn while net exports numbers saw exports contribute 0.4% to Q3 GDP, beating market expectations of 0.3%. We also saw the Reserve Bank of Australia maintain their current monetary policy stance at their December monetary policy meeting, opting to keep the official cash rate on hold at 1.5% for the remainder of the year.
The key risk event for the day ahead is the Q3 GDP read due out of the domestic economy. With the report due out at 11:30 EST, markets are expecting a quarterly increase of 0.6% with an annual rate of growth of 3.3%.
Moving into the Wednesday session, topside resistance is clearly evident on moves approaching 0.74 with first resistance evident at 0.7394 on the AUD/USD. First levels of downside support can be seen at 0.7318 before the 0.7300 handle. A break below these levels could see the Aussie test 0.7240.