Trade view /
08 November 2016 at 23:14 GMT
AUDUSD strength in the face of a rebounding US dollar has surprised many traders – but not those who follow the domestic scene in Australia. Iron ore and coking coal prices continue to rise, defying predictions of imminent sharp declines, and the Reserve Bank of Australia’s monetary policy statement last week effectively took further interest rate cuts off the table for the foreseeable future.
The Aussie will, no doubt, react to the US election result – for the Presidency as well as the Congress – but it would take a dominant win by the Democrats in both to give the US dollar much of a boost. More likely it will be a split decision: Presidency to Clinton; the Senate to the Republicans, which might induce some profit-taking in the USD.
Also worth keeping an eye on is tomorrow’s Reserve Bank of New Zealand's monetary policy statement. A big move by NZDUSD would take the AUDUSD along for the ride, although not as far. A rate cut is expected, and priced in, so the market-moving event will be the forward guidance given by the RBNZ.
Management and risk description
The Ozzy’s recovery persists (in keeping with its positive Elliott Wave structure) and there is now a potential multi-week (classical charting) Ascending Triangle pattern (see daily chart below), where while the Ozzy holds 0.7735/0.7720 support (on a closing basis) there is upside potential as high as 0.8025.
Entry: ordinarily AUDUSD would be a buy now (at 0.7750) but with this being “US election day” will wait until after New York close today before finalising – welcome to ask me then.
Stop: 0.7618, initially.
Target: 50% at 0.7848 and 50% at 0.7993.
Time horizon: allow several weeks for both targets to be met.
AUDUSD daily chart (click to expand)
AUDUSD weekly chart (click to expand)
Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more
– Edited by Gayle Bryant