Australian Dollar shows mild gains on reduced USD strength

• Australian Dollar records modest gains due to waning USD strength.
• Australian Q2 GDP meets expectations but relies heavily on government spending.
• US job openings decrease, indicating potential labor market easing, which weighs on USD.

The AUD/USD saw mild gains on Wednesday, rising to 0.6720 amid reduced USD strength. This move followed the release of Australian Q2 GDP data, which met expectations but highlighted the economy's reliance on government spending and subdued private domestic demand. This weakness supports the case for the Reserve Bank of Australia (RBA) to ease monetary policy in the near term. Michelle Bullocks will speak on Thursday.

Given the uncertain economic outlook in Australia and the Reserve Bank of Australia's (RBA) aggressive stance on monetary policy due to persistent inflation, financial markets anticipate only a 0.25% reduction in interest rates in 2024. 

Daily digest market movers: Australian Dollar rises on weak US jobs data, eyes on Bullock statements

• On the local front, Australia's Q2 GDP growth met expectations at 0.2% QoQ, but the YoY rate exceeded forecasts at 1.0%.
• Government spending boosted GDP growth by 0.3%, while private sector activity subtracted 0.1%.
• Net exports added 0.1% to growth, while inventory destocking reduced it by 0.3%.
• Weak private demand reinforced expectations for RBA easing later this year, but the best-case scenario is that the bank will only cut 25 bps in 2024.
• US job openings fell to 7.67 million in July, below expectations of 8.1 million.
• US decline in job openings suggests a cooling labor market, potentially adding pressure on the Federal Reserve to cut rates.
• Next Fed steps will likely be determined by Friday's Nonfarm Payrolls figures from August.

AUD/USD technical outlook:  Bullish exhaustion seen, indicators weaken

The AUD/USD pair rose mildly in Wednesday’s trading session, jumping from the lows of 0.6680s recorded on Tuesday and approaching the 0.6740 zone. 

The Relative Strength Index (RSI) retreated from overbought conditions, suggesting potential exhaustion in upward momentum. Also, the Moving Average Convergence Divergence (MACD) printed a red bar, indicating mounting selling pressure.

Volume has been decreasing in the last two trading sessions, which could be related to profit-taking. If the AUD/USD loses 0.6700, 0.6680 and 0.6660 would be the next support levels to watch. On the other hand, if it breaks above 0.6760, 0.6800 and 0.6820 are the next resistance levels to consider.