- AUD/USD buyers catch a breather while attacking the upper-end of a three-day trading range.
- Recovery in risk tone pulls US dollar back from fresh five-week top flashed the previous day.
- Upbeat activity numbers from the US, China and Europe rekindled economic recovery hopes despite virus woes.
- RBA is expected to cut benchmark rate, announce more QE, US presidential election race gets too stiff recently.
AUD/USD seesaws around 0.7055, extending pullback from the lowest since July 20, at the start of the key Tuesday’s Asian session. The aussie pair dropped to the fresh low in 3.5 months the previous day before bouncing off 0.6989 amid a recovery in trading sentiment. While mostly welcome economics could be cited for the quote’s latest bounce, market players may await important events like the monetary policy meeting of the RBA and the US presidential election for fresh impetus.
More money from RBA, blue wave in the US…
AUD/USD traders seem to prepare for the RBA’s rate cut, as well as a further Quantitative Easing (QE), amid a cautiously optimistic environment. Although Monday’s Asian session ignored better-than-forecast activity numbers from China and Australia, the risk barometer benefited from the European and the US PMIs during the European and North American trading.
Other than the data, increased odds of a soft Brexit and hopes that the Democratic Party will return to the throne with a blue wave, winning in both the houses, also added to the market’s positive mood. In doing so, traders paid little heed to the worsening of the coronavirus (COVID-19), mainly in Europe and the UK, as well as the delay in the US covid stimulus.
Against this backdrop, Wall Street defied the recently bearish mood while the US 10-year Treasury yields eased 1.2 basis points (bps) to 0.84% by the end of Monday’s North American session.
Looking forward, AUD/USD traders may remain cautious ahead of the RBA, before eyeing the US presidential elections. Most forecasts suggest the Aussie central bank to prove its signals of a rate cut and QE right, with benchmark interest rate likely cut to 0.10% from 0.25% and additional Australian dollar 100 billion of bond purchase. While most of these actions are already talked about, as well as priced recently, any surprise moves will be important to watch. On the other hand, any shift in the US election polls towards supporting the current President Donald Trump will add volatility to the global markets.
Read: RBA Preview: Rate cut and QE expansion to turbo-charge economic recovery
Technical analysis
Despite the recent pullback from multi-day low, AUD/USD prices are yet to cross 100-day EMA, at 0.7065 now, which tests the bulls since last Thursday. As a result, sellers targeting a fresh low since mid-July towards testing the 200-day EMA level of 0.6955 can remain hopeful.
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