- Aussie extends its reversal from 0.6550 to 0.6420 so far.
- A more cautious mood in the markets has favored the dollar as a haven.
- AUDUSD: Support at 0.6210 is key to defend recent move higher — SocGen.
The aussie has taken a major pullback on Wednesday, with the pair extending its reversal from Tuesday’s high of 0.6550 to 0.6420 so far as investors’ risk appetite has waned.
Cautious markets awaiting the results of the US elections
Market sentiment soured on Wednesday, with global stock indices trading lower, while the dollar and Treasuries rallied ahead of the results of the US mid-term elections. Against this backdrop, the risk-sensitive Australian dollar has lost around 1.4% on the day, after rising more than 3% in the previous three days.
In the US, with the votes still counted, the Democrats have obtained better results than expected, although the race for control of Congress is very tight, which leaves President Biden’s economic agenda up in the air.
On the macro front, with a tight calendar today, the focus is on the release of the US CPI numbers due out on Thursday. Given that the market is hypersensitive to Fed monetary policy expectations, any surprise in the US inflation figures could lead to a significant increase in dollar volatility.
Just today, the president of the Richmond Fed, Barkin, has affirmed that the fight against inflation “could lead to a recession” since, according to him, the rises in rates are questioned by artificial elements such as “the high saving of consumers, the lack of labor supply”. These comments have eased the upward pressure on the dollar.
AUDUSD: 0.6210 support defense crucial — SocGen
From a technical point of view, Société Générale FX analysts point to the 0.6210 level to sustain the recent bullish move: “A rebound is not ruled out; the upper band of the channel near 0.6680/0.6720 and 0.6900 could be short resistance term (…) Should the pair fail to hold the recent upper low at 0.6270, a further downtrend stretch towards 0.6100 and 0.5980 projections could materialize.”
Technical levels to watch
Source: Fx Street
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