The Australian dollar is on the charge in early Asian trade on Wednesday morning, underpinned by a swell of investor optimism that Hillary Clinton will win the US presidential election along with technical buying.
As shown in the daily chart below, the AUD/USD has broken above previous resistance layered up to .7760, currently sitting at .7765.
Though higher commodity prices have no doubt underpinned the move, all of the gains overnight occurred at the start of trade in US stocks, grinding higher from around .7700 to its present level.
It now sits at the highest level since April 27, the day when financial markets were stunned by a shockingly-low Australian Q1 CPI print, something that led the RBA to cut interest rates twice over the next three months.
Given the break above .7760, traders will now be eyeing a move back to the yearly high of .7835 struck on April 21 should Hillary Clinton win the US presidency.
And that factor and that factor alone will dictate movements in the Aussie dollar on Wednesday.
The Westpac-MI Australian consumer confidence report for November will be released at 10.30am AEDT along with Chinese CPI and PPI figures for October at 12.30pm AEDT.
On any other day they would be seen as important, and potentially market moving, but that won’t be the case today. It’s all about the US election.
David de Garis, senior economist at the National Australia Bank, sums up the likely price action in financial markets, including the Aussie dollar, nicely.
“Trading over recent days has given a pretty clear pointer to how markets might initially react,” he says.
“Clinton wins and it’s risk-on; equities rally, bonds are heavy and the USD comes back as a preferred asset. Risk-off currencies such the yen and the CHF would be sold as the first port of call. Aussie and Kiwi would benefit, other things being equal.
“Should Trump win, then the initial reaction is likely to be risk-off, a reverse, at least initially as markets begin to focus more intensively and price toward what a Trump Administration might mean at such an early stage of the process.”
Although there’s little doubt that markets will welcome a Clinton victory, it’s questionable just how large the reaction would be to such an outcome given the bullish price action seen in recent days.
A Clinton victory is largely priced in, meaning the majority of the risk is for the opposite outcome to occur.
We’ll likely have a strong indication by around midday in Sydney.
Here’s the Aussie dollar scoreboard as at 7.55am AEDT.
- AUD/USD 0.7765 , 0.004 , 0.52%
- AUD/JPY 81.62 , 0.93 , 1.15%
- AUD/CNH 5.2777 , 0.0309 , 0.59%
- AUD/EUR 0.7046 , 0.0051 , 0.73%
- AUD/GBP 0.6269 , 0.0039 , 0.63%
- AUD/NZD 1.0490 , -0.0029 , -0.28%