Australian Dollar retakes 0.7000 as blue wave sweep drives US Dollar lower

• From a low of 0.6954, AUD/USD recovers above 0.7000 with a gain of over 0.59%.
• With US Treasury yields and the Dollar falling, WTI tumbles nearly 9%.
• Following the latest increase, economists expect RBA rates to peak at 4.85%.

After touching a 12-day low of 0.6954, the Australian Dollar has recovered above 0.7000, trading over 0.59% higher at the time of writing. The rebound follows a Democratic sweep in the US midterm elections, which put the US Dollar under pressure and supported the Australian currency.

AUD/USD recovers from a 12-day low as lower US yields weigh on the Greenback

A 0.36% decline took the US Dollar Index (DXY) to 101.53 as investors feared a Democrat-dominated US Congress would reject bills proposed by Trump. The index measures the Dollar against a basket of six currencies. Broader sentiment remains positive, with US equities finishing Wednesday’s session higher.

Offering some encouragement, Democratic Party leaders in the House of Representatives and the Senate promised to bring the Iran war to an end. US Vice President JD Vance said the war was the principal reason for the Republicans’ defeat. Oil prices fell on the remarks, with the US crude benchmark West Texas Intermediate slumping nearly 9% to $88.05 per barrel.

Expectations that petrol prices may start falling again helped drive US Treasury yields lower against this backdrop. The yield on the US 10-year Treasury note declined 7.6 basis points to 4.890%.

At 54.5 in October, the US ISM Services PMI fell short of forecasts and signalled slower growth, although activity remained in expansionary territory. New orders weakened, but a slight decline in prices paid offered encouragement on inflation. Meanwhile, a rise in the employment sub-component indicated continued resilience in the labour market.

The October ADP National Employment Change report comfortably beat expectations: private employers added 86K jobs against a forecast of 69K. Separate figures showed little movement in the trade deficit in August.

Attention now turns to Thursday’s releases, with US jobless claims forecast to rise to 196K from 194K. Comments from Fed officials are also due.

With no Australian economic releases on the calendar, traders continued to assess the Reserve Bank of Australia (RBA) rate increase and Governor Bullock’s slightly dovish press conference.

An Australian Financial Review survey of 30 economists indicated that rates have reached their peak at 4.85%, with respondents expecting the RBA to suspend its tightening cycle. Although most analysts hold that view, they cautioned that external shocks, including the Middle East conflict and elevated energy prices, could lead the central bank to respond.

Notably, forecasts published by the RBA on Tuesday project that core inflation will return to its 2.5% target in mid-2028.

Next on Australia’s calendar is September’s Trade Balance. The surplus is forecast to widen to 1,200 million from 495 million in August.

AUD/USD Price Forecast: Near-term technical bias remains bearish

Trading at 0.7006 on the daily chart, AUD/USD retains a bearish near-term bias below the latest cluster of three simple moving averages around 0.7056. The pair also sits beneath upward-sloping trend-line break levels at 0.7121 and 0.7472, leaving it on the defensive. Although the Relative Strength Index (14) is approaching the more neutral 49 area, this points to easing downward momentum rather than a decisive turn towards a bullish bias.

The first resistance on a recovery lies near 0.7056, where the three simple moving averages converge. Beyond that is the broken rising support trend line around 0.7121, followed by a firmer horizontal barrier at 0.7198 ahead of higher structural lines at 0.7472, 0.9039 and 1.0046. Below the market, support remains at the upward trend-line break near 0.6923. Should selling resume, the earlier break of the downward resistance trend line around 0.6348 provides a deeper structural floor.

(The technical analysis of this story was written with the help of an AI tool. Know more.)