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Oct 29 - 01:55 PM

AUD/USD - COMMENT- COVID, Election Risks Keep AUD/USD Support Vulnerable

By Christopher Romano  —  Oct 29 - 12:15 PM

AUD/USD fell on Thursday, surrendering an overnight bounce and putting key support near 0.7000 under threat as COVID concerns, U.S. election uncertainty and interest rate influences keep risk aversion high.

Investors flocked to the safe-haven U.S. dollar and yen as pandemic lockdowns nL8N2HK7AA dimmed global economic recovery hopes, while tightening polls and concerns about a potentially contested U.S. election result nL1N2HK0LP added to unease.

The RBA meets on Nov.
3 and is expected to cut rates.
Economists in a poll expected the RBA to expand its bond buying program nL1N2HJ064, allowing Australian-U.S.
spreads to hand the U.S. dollar a yield advantage.

Options investors are expecting AUD/USD to trade lower, with risk reversals AUD1MRR=FN showing vol premiums for puts over calls have increased sharply.

Technicals highlight downside risks for AUD/USD.
The pair was trading below the 10- and 21-day moving averages while daily and monthly RSIs imply bearish momentum is in place.

Should support near 0.7000 break, bears will target the 23.6% Fibo of the 0.5510-0.7413 rise and July's monthly low.
A break of the latter could lead to a test of 0.6645/95 support.

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Refinitiv IFR Research/Market Commentary


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