- AUD/USD edged lower on Friday and eroded a part of the overnight gains to multi-week tops.
- The prevalent cautious mood drove some haven flows to the USD and exerted some pressure.
- Investors await US political developments and NFP report before placing fresh directional bets.
The AUD/USD pair traded with a mild negative bias through the early European session, albeit lacked any follow-through selling and held comfortably above mid-0.7200s.
The pair edged lower on the last trading day of the week and eroded a part of the previous session’s strong gains to the 0.7300 neighbourhood, or six-week tops. A modest pullback in the US equity futures drove some haven flows towards the US dollar, which, in turn, was seen as a key factor exerting some pressure on the AUD/USD pair.
The markets are betting that Democrat candidate Joe Biden will become the next US president. However, the final outcome of the nail-biting US election remains unclear and hangs on the vote count from a few remaining battleground states. The wait for the results kept investors on edge and the high degree of uncertainty kept investors on edge.
Meanwhile, the fact that Republicans will retain control of the Senate dashed hopes for large fiscal stimulus packages to support the economy any time soon. The combination of factors weighed on investors’ sentiment and was evident from the prevalent cautious mood in the financial markets, which benefitted traditional safe-haven assets.
That said, the downside remains limited, at least for the time being, as traders now seemed reluctant to position for big movement in either direction ahead of Friday’s release of the closely watched US monthly jobs data. The NFP report, along with US political developments, will influence the USD price dynamics and produce some meaningful trading opportunities.
Technical levels to watch
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