AUD/USD languishes near YTD low, above mid-0.6300s despite stronger Australian GDP

• AUD/USD remains under some selling pressure for the second successive day on Wednesday.
• The better-than-expected Australian Q2 GDP print fails to impress bulls or lend any support.
• The USD touches a six-month peak and supports prospects for a further depreciating move.

The AUD/USD pair fails to capitalize on the overnight modest bounce from the vicinity of mid-0.6300s, or its lowest level since November 2022 and attracts fresh sellers during the Asian session on Wednesday. Spot prices remain depressed near the 0.6360 region and move little in reaction to the better-than-expected Australian GDP report.

In fact, the Australian Bureau of Statistics reported that the economy expanded by 0.4% during the second quarter, more than the 0.2% growth registered in the previous quarter and the 0.3% rise anticipated. The yearly growth rate also surpassed market expectations and came in at 2.1%, though marked a slight slowdown from the 2.3% previous. The data, however, does little to lend any support to the AUD/USD pair amid concerns about the worsening economic conditions in China, which tends to undermine the China-proxy Aussie.

The fears resurfaced after a private survey showed on Tuesday that business activity in China's services sector expanded at its slowest pace in eight months. Adding to this, US Secretary of Commerce Gina Raimondo doesn't expect any changes to the US tariffs imposed on China by the Trump administration until the ongoing review by the US Treasury is complete. This, along with the Reserve Bank of Australia's on-hold rate decision and expectations that the policy tightening cycle is over, continues to undermine the Australian Dollar (AUD).

The US Dollar (USD), on the other hand, climbs to a nearly six-month high and remains well supported by growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer. Moreover, the markets are pricing in the possibility of one more 25 bps lift-off in 2023. This, in turn, remains supportive of elevated US Treasury bond yields, which, along with the prevalent cautious market mood favours the USD bulls and suggests that the path of least resistance for the risk-sensitive AUD/USD pair is to the downside.

Technical levels to watch