AUD/USD down by 0.5%, trading at the lows to start the session
The pair is being driven lower to start the day by a weaker aussie, after being weighed down by RBA Kent's remarks (⬆️) from earlier today.
That is seeing price now trade to a fresh three-week low of 0.7031 and brings into focus support from the 25 September low @ 0.7006 and the 0.7000 handle.
The reversal in the dollar and risk yesterday saw sellers keep more control in the pair on a close below the 100-day MA (red line). That remains the key resistance point that buyers need to work their way back above to wrestle back some momentum.
For now though, sellers are looking poised so let's see what factors may lead to a potential test or break below the 0.7000 handle.
In terms of RBA pricing, cash rate futures suggest that a 10-15 bps rate cut on 3 November is fully priced in by now so that leaves little scope for any major downside in the aussie despite the more dovish remarks from Kent earlier.
I would argue all things being equal, the 0.7000 level should hold if the aussie side of the equation solely relies on the RBA rhetoric at this point in time.
However, that is not the case as we look towards the trading day ahead.
US stimulus talks are entering into what seems to be the final pre-election showdown and though we know that a deal isn't coming, it still didn't help risk assets yesterday as market participants are still being swayed by headline risks.
Another setback today ahead of the end of Pelosi's 48-hour window could well keep the dollar bid and a cause stumble in risk assets i.e. bad for the aussie, and that may bring into question the 0.7000 handle in AUD/USD later in the day.
That may yet trigger more sell stops on the way down and could spell further short-term pain for AUD/USD with little meaningful support seen under the 0.7000 handle.
