Aussie goes on a roller-coaster ride

The Australian dollar has settled down, after showing sharp movement in both directions. In the European session, AUD/USD is trading at 0.7154, down 0.14% on the day.

US election adds to Aussie volatility

This week has been a roller-coaster adventure for investors and traders, as the Australian dollar continues to show significant volatility. On Tuesday, AUD/USD climbed 1.5%, its best one-day performance since August 28th. There has been no let-up on Wednesday, with the pair showing swings of some two percent, although the net daily movement has been negligible.

Investors were treated to a most unusual scene on Tuesday, as the Australian dollar soared despite a rate cut by the RBA, which lowered rates from 0.25% to a record low of just 0.10 per cent. The central bank also introduced QE for the first time ever, announcing that it would purchase government bonds to the tune of A$5 billion each week. The RBA wants to see a lower Australian dollar, which has climbed a staggering 16.8% since April. Ordinarily, the easing measures which the bank announced would weigh on the Australian dollar, but in this case, the market excitement over a “blue wave” in the US election outweighed any investor concerns about ultra-low interest rates. Investors, buoyed by polls that showed indicated that the Democrats might sweep the presidency and both houses of Congress, were in a buy-everything mood on Tuesday, which boosted commodity-based currencies like the Australian dollar.

If you’re just tuning in now to the latest US election results, rest assured that you haven’t missed a thing. The presidential contest between Donald Trump and Joe Biden has turned into a neck-and neck race, with the outcome up in the air until a handful of battleground states release their results. This could take several days, due to the massive number of ballots that were mailed in by voters. Instead of an explosive blue sweep, the political arena could remain deadlocked, with appeals to the Supreme Court a very real possibility. The uncertainty which has now gripped the financial markets has led to sharp volatility from the Australian dollar.

Week Ahead – Election Time!

The US dollar gets a beating

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AUD/USD Technical

• AUD/USD faces resistance at 0.7218. The next resistance line is at 0.7270.
• We find support at 0.7071, followed by support at 0.6976
• AUD/USD has tested the 50-MA line for the first time since mid-October. If the pair breaks above this line, it would indicate an upward trend

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