Aussie Dollar reclaims 0.7000 as blue wave sweep tumbles the US Dollar
The Democratic blue sweep in the US midterm elections weighed on the US Dollar and boosted the Australian Dollar, which has bounced from a 12-day low of 0.6954 and reclaimed 0.7000, gaining over 0.59% at the time of writing.
The Australian Dollar has regained strength after the Democratic Party's victory in the US midterm elections, which led to a drop in the US Dollar's value. The Aussie Dollar soared from a 12-day low of 0.6954 to reclaim 0.7000, marking a gain of over 0.59%. This surge in the Australian Dollar was driven by positive market sentiment, reinforced by a rise in US equities.
The US Dollar Index (DXY) experienced a decline of 0.36%, falling to 101.53, as concerns over potential Democratic rejections of bills proposed by Trump grew. The Democratic leaders in the House of Representatives and Senate pledged to end the Iran war, a factor that may have contributed to the US Dollar's decline. This news also impacted oil prices, with West Texas Intermediate crude Oil dropping nearly 9% to $88.05 per barrel.
US Treasury yields softened as a result, with the 10-year T-note yield falling 7.6 basis points to 4.890%. US economic data indicated that the ISM Services PMI for October was lower than expected but remained positive, indicating expansion in the economy. The trade deficit remained unchanged in August, while the ADP National Employment Change report for October surpassed forecasts, with private hiring creating 86K jobs, surpassing expectations of 69K.
Moving forward, traders are closely watching Thursday's US jobless claims data, expected to increase to 196K, and the Federal Reserve officials' remarks. In Australia, the Reserve Bank of Australia (RBA) recently raised rates and delivered a mildly dovish press conference. Economists polled by the Australian Financial Review indicated that rates have peaked at 4.85%, and they anticipate a pause in the rate hike cycle.
Despite this, external shocks like the Middle East conflict and high energy prices could still prompt a central bank reaction. The RBA's latest forecasts suggest core inflation will return to its 2.5% target in mid-2028. The Aussie Dollar's economic calendar features the Trade Balance for September, expected to report a surplus of 1,200 million, up from 495 million in August.
The daily chart shows AUD/USD at 0.7006, maintaining a bearish near-term bias with the pair trading below key support levels at 0.7056, 0.7121, and 0.7472.
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