- China launched funding schemes to support its stock market.
- Treasury yields rose as bets for a Trump win increased.
- Markets are pricing a 26% chance of an RBA rate cut in December.
The AUD/USD forecast shows a recovering dollar as markets return their focus to the upcoming US presidential election. Meanwhile, a top RBA official noted that Australia’s labor market had surprised the central bank, which could mean further delays in rate cuts.
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The dollar rebounded on Monday after ending Friday down due to a surge in risk appetite. China launched funding schemes to support the stock market, boosting commodity currencies like the Aussie. Economic stimulus in China improves the outlook for demand for commodities like gold and oil.
However, the greenback recovered by Monday as the focus shifted to the November presidential election. Treasury yields have been on the rise as bets for a Trump win increase. A Trump win is bullish for the dollar because his policies will likely increase inflation and interest rates.
This month, the dollar has risen over 2.5% due to better-than-expected economic data. At the same time, the Fed’s rate cut outlook has shifted, with markets now expecting a gradual pace. Currently, bets show a 95% chance of a rate cut in November.
Meanwhile, the Australian dollar jumped last week after domestic data revealed a robust labor market. September was the sixth month where jobs beat estimates. Notably, on Monday, RBA deputy governor Andrew Hauser said the report was a surprise for the central bank. However, he noted that there could be many reasons behind the strong labor market. Therefore, the central bank would not only depend on that data to decide policy. Nevertheless, markets are pricing a lower 26% chance of a rate cut in December.
AUD/USD key events today
Markets do not expect any critical reports from Australia or the US. Therefore, traders will keep speculating on the upcoming US election.
AUD/USD technical forecast: Bears fight for control at the 30-SMA
On the technical side, the AUD/USD price is dropping after failing to sustain a move above the 30-SMA. The bias is bearish since the price trades below the SMA with the RSI below 50. However, bearish momentum has eased as the price sticks close to the SMA.
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At the same time, the RSI made a bullish divergence, signaling a looming reversal. If this signal plays out, the price will break above the 0.6700 level and the 30-SMA. Otherwise, bears will revisit the 0.6650 level.
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