AUD/USD bears test 61.8% Fib/trendline-support confluence

• AUD/USD bears in control as the US dollar catches a bid.
• Bears are testing bullish commitments at the trendline support. 

AUD/USD is currently trading at 0.7154, down some 0.73% and trading between a low of 0.7150 and a high of 0.7210.

The US dollar has dented the dollar bloc’s recovery in a sharp move to the upside following a report that Johnson and Johnson COVID-19 COVID-19 trial, (and today’s news that the Eli Lilly study also), were paused.

• Eli Lilly: Clinical trial of COVID-19 antibody treatment paused for safety concern

At the same time, a gauge of inflation rose for a fourth straight month. 

US consumer prices rose 0.2% in September, matching expectations, though the pace has slowed amid considerable slack in the economy as it gradually recovers from the COVID-19 recession.

However, while the dollar is making a bullish comeback, technically, it is far from out of the bearish territory, fundamentally.

The expectations of US Vice President Joe Biden’s winning in the November 3rd presidential election is a constant thorn in the side for bulls.

DXY 4-hour chart

Either party is expected to bring large stimulus for the pandemic-hit economy, bolstering the stock market and investor risk appetite but a Biden victory would be a dead cert. 

Meanwhile, China reportedly banned Aussie coal imports and when this is added to the list of other things Australian no longer welcome there, it adds to the downbeat sentiment surrounding the Aussie. 

Initially, AUD only dipped a little on what should be terrible news.

From this point, the market will continue to focus on ongoing stimulus negotiations, though the odds of a significant pre-election deal on spending remain low. 

At the same time, the Reserve Bank of Australia will be a theme that will garner more traction this week. 

The RBA is expected to cut the cash rate to 0.1% in November. The RBA Governor Lowe is speaking on 15 October.

”We expect him to signal more forcefully the likelihood of a rate cut in November. He may also clarify the RBA’sthinking about ‘pure’ QE,” analysts at ANZ bank said.

”September’s reference to the fact the Board “continues to consider how further monetary measures could support the recovery” has become “the board continues to consider how additional monetary easing could support jobs as the economy opens up further.” So “further monetary measures” are now explicitly referred to as “additional monetary easing.”

We take that as a clear indication the RBA will cut the cash rate to 0.1% when it next moves,” the analysts argued. 

AUD/USD levels

AUD/USD has corrected to a 61.8% Fibonacci retracement and the confluence of the trendline support and prior resistance structure.