Australian Dollar regains ground as Democrats eye victory in both Houses

The Australian Dollar (AUD) has shown signs of recovery against the US Dollar (USD) on Wednesday, as risk-appetite among investors improved. The AUD jumped to near 0.6977, gaining due to this shift in market sentiment. S&P 500 futures have experienced a V-shaped recovery, regaining half of their early losses, though they are still 0.6% lower at around 7,530.

This improvement in risk profile has bolstered the appeal of the Australian currency. Democrats have secured a majority of seats in the Senate, and are expected to win the majority of House of Representatives seats as well, with current counts showing them leading with 201 seats, needing 218 to achieve a majority. The US Dollar has also recovered, with the US Dollar Index (DXY) trading 0.4% lower to near 101.48, but has rebounded sharply from its day's low of 101.25.

Analysts suggest that these developments indicate a "Sell the rumour Buy the News" phenomenon. The Reserve Bank of Australia (RBA) raised its Official Cash Rate (OCR) by 25 basis points to 4.85% on Tuesday, signaling that further interest rate hikes are unlikely. The AUD/USD pair is currently at 0.6982, maintaining a bearish outlook as it stays below the 20-period Exponential Moving Average (EMA) at 0.7005.

While the RSI is around 45, suggesting consolidative momentum rather than oversold conditions, the AUD must overcome the 20-period EMA to signal a potential recovery.