- AUD/USD has continued to chip away at the downside within the descending channel as risk sentiment fades away in illiquid North American markets.
- AUD/USD is currently trading at 0.7195 from a high of 0.7238 and a low of 0.7187.
AUD/USD’s recent recovery from 0.7024 to 0.7296 was capped as the dollar picks up investors again based on interest differentials following the FOMC statement and ongoing concerns over global growth. Today, the Aussie if tracking the weakness in European bourses and now Wall Street with the down more than 400 points as a stronger dollar is hurting sales of the multinationals with the DXY now through the midpoint of the 97 handle.
Analysts at Rabobank argued that bullish bets on the US dollar have increased to the highest level so far this year. “USD net long positions edged higher to 40,282 in the week ending November 6 – before the US mid-term elections resulted in the Democrats regaining control of the House and the Republicans tightening their grip on the Senate.”
Trade wars support the greenback, weighing on AUD/USD
Apart from the interest rate differentials, the analysts explained that the USD is also supported by prevailing concerns about trade war between the US and China: In his latest tweet President Trump reiterated that the US cannot tolerate substantial trade deficits with other countries, including European allies:
“Massive amounts of money spent on protecting other countries, and we get nothing but Trade Deficits and Losses. It is time that these very rich countries either pay the United States for its great military protection, or protect themselves…and Trade must be made FREE and FAIR!”
AUD/USD levels
AUD/USD the daily RSI remains biased lower with the pair now back in the cloud. Monthly RSI is biased up though with the price above a slew of daily MAs which should mean that the downside is relatively limited in the near term. A break below 0.7021 targets the early Feb ’16 low (0.6973) and Jan ’16 low (0.6827) levels again. The September and August monthly highs of 0.7315 and 0.7453 are key upside targets.
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