The Australian Dollar (AUD) retraced some of its recent gains against the US Dollar (USD) on Wednesday, as markets remained cautious ahead of the US presidential election and the Federal Reserve’s interest rate decision. The AUD/USD pair depreciated as the US Dollar strengthened, driven by growing confidence in “Trump trades” following a favorable shift in polling data, with Republican candidate Donald Trump holding a lead over Democrat Kamala Harris.
Polls show a tight race, with Trump currently leading 57% to 43% on Kalshi, and 60.7% to 39.5% on Polymarket. These figures highlight increasing support for Trump, though the race remains competitive as election day nears.
Market Focus: Fed Rate Cut and US Election Uncertainty
Attention is also on the Federal Reserve’s anticipated interest rate decision on Thursday, with markets pricing in a 96.4% probability of a 25 basis point cut, according to the CME FedWatch Tool. A modest rate reduction is expected to provide further support for the USD.
Earlier this week, the Reserve Bank of Australia (RBA) maintained the Official Cash Rate (OCR) at 4.35%, marking its eighth consecutive pause. RBA Governor Michele Bullock emphasized the need for tight monetary policy amid ongoing inflation risks and a robust labor market. Additionally, Australia’s Purchasing Managers Index (PMI) data for October showed positive growth in the services sector, partially offsetting declines in manufacturing.
US Election Developments: Trump Gains Momentum
Early exit polls from key battleground states indicate a narrow advantage for Trump. In Wisconsin, he leads with 56% of the vote to Harris’ 42.5%, with 7.5% of expected votes counted. In North Carolina, polling suggests a tight race, while in Michigan, Harris’ lead has narrowed significantly. The state of Georgia also shows early signs of Trump’s momentum, though only a small portion of the vote has been counted so far.
Preliminary exit poll results from Pennsylvania show a strong lead for Harris, with approximately 8% of votes counted, securing 71% of the vote.
Economic Indicators: Mixed Signals from Both Sides
In the US, the ISM Services PMI rose to 56.0 in October, surpassing expectations, while the S&P Global Services PMI fell slightly to 55.0. Australia’s Judo Bank Services PMI improved to 51.0, and the Composite PMI also rose, indicating overall positive private sector activity. However, Australia’s inflation data showed an uptick in October, with the TD-MI Inflation Gauge rising by 0.3%, signaling persistent price pressures.
Job advertisements in Australia showed a 0.3% increase month-over-month, marking a slowdown from the previous month’s 2.3% rise. Meanwhile, China’s Commerce Minister met with Australia’s Trade Minister, reinforcing the desire for improved trade relations between the two nations.
Technical Analysis: Bearish Outlook for AUD/USD
The AUD/USD pair is trading around 0.6590, signaling potential continued downward momentum. Technical indicators suggest a bearish outlook, as the pair has fallen below both the nine-day and 14-day Exponential Moving Averages (EMAs), with the 14-day Relative Strength Index (RSI) below 50.
Immediate support is found near the three-month low of 0.6536, with a break below this level potentially targeting the psychological support at 0.6500. On the upside, resistance is seen at 0.6603 (nine-day EMA) and 0.6620 (14-day EMA), with a breakout above these levels possibly signaling a reversal towards the 0.6700 mark.
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