AUD/USD is dragged to a session low of 0.7012 from around 0.7050 earlier, as the risk mood looks more sour as we approach European morning trade. European and US futures are sitting lower, keeping the dollar modestly underpinned for now.
It is shaping up to be a session that will focus on risk flows and if the defensive tone keeps up, AUD/USD may be pressured to test the 0.7000 handle once again.
The low yesterday touched 0.7002 but buyers also leaned on daily support from the 25 September low @ 0.7006. That said, the key psychological level will be the 0.7000 handle and I would expect stops to sit below the figure level.
Amid the unrelenting run higher from late March to September, the 23.6 retracement level sits @ 0.6965 and will offer some support in case 0.7000 cracks.
But beyond that, the pair may find it hard to search for any technical reprieve before running into the 200-day MA (blue line) @ 0.6800.
On the aussie side of the equation, the RBA meets next week with a 10-15 bps rate cut already priced in at this stage. I would argue there is only limited scope for movement for the aussie on the central bank decision but we'll see if there are any surprises.
The dollar and risk side of the equation will be the more dominant factor as we have the US election to contend with and for now, there is still much uncertainty on who is going to win and if even there will be a quick outcome at the end of it all.
If the election result gets dragged on for days - or even weeks - the volatility induced could potentially drive the pair all over the place come what may.