Australian Dollar rebounds as Democrats look to win both Houses

• Near 0.6977: Australian Dollar recovers against the US Dollar as sentiment strengthens.
• A Senate majority goes to Democrats, who also lead in the House of Representatives.
• 25 bps increase takes the RBA interest rate to 4.85% on Tuesday.

AUD/USD recovers to near 0.6977. Renewed investor appetite for risk supports the Australian Dollar (AUD) against the US Dollar (USD) on Wednesday, following a sharp sell-off over the previous two trading sessions.

During early European trading, S&P 500 futures have recouped half their initial losses in a V-shaped rebound. They remain 0.6% lower at around 7,530, but the recovery appears to signal a return of investor risk appetite.

As a currency particularly sensitive to market sentiment, the Australian Dollar has become more attractive as risk appetite improves.

Despite Democrats securing a Senate majority and being expected to win the House of Representatives, S&P 500 futures have staged a strong rebound. BBC News reports that Democrats lead the House vote count with 201 seats, against the 218 seats required for a majority.

Most of the US Dollar’s earlier losses have also been recovered. At the time of writing, the US Dollar Index (DXY) stands near 101.48, down 0.4%, after rebounding sharply from its intraday low of 101.25. The index measures the Greenback against six major currencies.

The strong rebounds taking shape in S&P 500 futures and the US Dollar point to a “Sell the rumour Buy the News” response.

In Australia, Tuesday’s expected 25 basis points (bps) increase by the Reserve Bank of Australia (RBA) took the Official Cash Rate (OCR) to 4.85%. The central bank also signalled a very high threshold for any further interest rate rise.

0.6982: AUD/USD Technical Outlook

Trading at 0.6982 on the daily chart, AUD/USD remains below its 20-period Exponential Moving Average (EMA) of 0.7005, keeping the near-term outlook bearish. Failure to regain this short-term EMA points to continued pressure on the upside. With the Relative Strength Index (RSI) around 45, momentum indicates consolidation rather than oversold conditions. Further losses remain possible if sellers retain control.

Any recovery first faces resistance at the 20-period EMA near 0.7005. Only a sustained move above that level would alleviate the bearish bias and create scope for a more constructive advance. Until then, rallies remain exposed to renewed selling in the coming sessions.

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