US Dollar sinks on blue wave sweep as Aussie Dollar retakes 0.7000

• Back above 0.7000, AUD/USD gains over 0.59% after recovering from 0.6954.
• Alongside declines in US Treasury yields and the Dollar, WTI tumbles nearly 9%.
• Following the latest hike, economists put the RBA rate peak at 4.85%.

The Australian Dollar has recovered from a 12-day low of 0.6954 to regain 0.7000, trading over 0.59% higher at the time of writing. Supporting the rebound was the Democratic sweep in the US midterm elections, which put pressure on the US Dollar.

Are lower US yields supporting AUD/USD’s recovery from a 12-day low?

Risk sentiment remains upbeat, with US equities ending Wednesday’s trading higher. Meanwhile, concerns that a Democrat-controlled US Congress would reject bills proposed by Trump weighed on the US Dollar Index (DXY). The index, which measures the US currency against a basket of six currencies, declined 0.36% to 101.53.

Adding to the positive mood, 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 attributed the Republicans’ defeat primarily to that war. Following the remarks, Oil prices came under pressure: West Texas Intermediate, the US crude Oil benchmark, slumped nearly 9% to $88.05 per barrel.

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

On the US economic front, October’s ISM Services PMI eased to 54.5, missing forecasts while remaining in expansionary territory. New orders lost momentum, but a slight decline in prices paid was encouraging for inflation. At the same time, an increase in the employment sub-component pointed to continued resilience in the jobs market.

While separate figures indicated little movement in August’s trade deficit, October’s ADP National Employment Change report comfortably beat expectations. Private-sector hiring added 86K jobs, against a forecast of 69K.

Attention now turns to Thursday’s releases. US jobless claims are forecast to rise to 196K from 194K, while remarks 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 mildly dovish press conference.

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

Notably, forecasts released by the RBA on Tuesday project a return of core inflation to its 2.5% target in mid-2028.

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

AUD/USD Price Forecast: What does the technical outlook suggest?

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 remains under the upward-sloping trend-line break levels of 0.7121 and 0.7472, leaving it on the defensive. Although the Relative Strength Index (14) is moving towards the more neutral 49 area, this points to weakening downward momentum rather than a definite turn bullish.

The first upside hurdle is the triple simple moving average level around 0.7056, ahead of the broken upward support trend line near 0.7121. Beyond that, the horizontal barrier at 0.7198 provides a firmer ceiling before the higher structural lines at 0.7472, 0.9039 and 1.0046. Support remains at the upward trend-line break around 0.6923. Should selling pressure return, the earlier break of the downward resistance trend line near 0.6348 offers a deeper structural floor.

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