TECHNICAL ANALYSIS

AUD / USD approaches 0.7000 again to start the session


The aussie is kept lower on the milder risk mood so far

AUD / USD D1 30-10
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AUD / USD is trailed to a session low of 0.7012 from around 0.7050 earlier as the risk mood looks sour as the morning European trade approaches. European and US futures are lower, keeping the dollar modestly underpinning for now.

It is shaping up to be a session that will focus on risk flows and if the defensive tone continues, AUD / USD could be pushed to test the 0.7000 grip again.

Yesterday’s low touched 0.7002, but buyers also relied on daily support from the September 25 low at 0.7006. That said, the key psychological level will be the 0.7000 grip and I would expect the stops to be below the figure level.

In the midst of the relentless rise from late March to September, the 23.6 retracement level sits at 0.6965 and will offer some support in case 0.7000 cracks.

But beyond that, the pair may find it difficult to seek technical reprieve before hitting the 200-day MA (blue line) @ 0.6800.

On the Australian side of the equation, the RBA is meeting next week with a 10-15bp rate cut already factored in at this point. I would say there is only limited room for maneuver for the aussie on the central bank’s decision, but we’ll see if there are any surprises.

The dollar and the risk side of the equation will be the most dominant factor as we have to fight the US election and at the moment there is still a lot of uncertainty over who will win and if even there will be a quick result at the end of it all.

If the election outcome is dragged on for days – or even weeks – the induced volatility could potentially drive the pair everywhere, no matter what.

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