AUD Unfazed Ahead of U.S. Election; Topside Targets Remain Favored

2016-11-07 17:05:00

Talking Points:

- AUD/USD Unfazed Ahead of U.S. Election; Topside Targets Remain Favored.

- USD/JPY Outlook Mired by Wait-and-See BoJ Policy; 105.40 Hurdle Remains in Focus.

Currency	Last	High	Low	Daily Change (pip)	Daily Range (pip)
AUD/USD	0.7694	0.7708	0.7659	20	49

AUD/USD Daily

Chart - Created Using Trading View

The Australian dollar outperforms ahead of the U.S. Presidential election, and the higher-yielding currency may work its way back towards the October high (0.7734) as it carves a near-term series of higher highs & lows; broader outlook for AUD/USD remains constructive as the pair continues to trade within the ascending triangle formation from earlier this year, while the Relative Strength Index (RSI) preserves the upward trend carried over from the summer months.
It seems as though the Reserve Bank of Australia (RBA) will endorse a wait-and-see approach at the last 2016 policy meeting on December 6 as the central bank sees the economy growing‘close to its potential rate, before gradually strengthening;’ may see the near-term resilience in the Australian dollar carry into 2017 should Governor Philip Lowe and Co. show a greater willingness to gradually move away from its easing-cycle.
May see AUD/USD trade within a tightening range as the pair largely remains capped around 0.7730 (61.8% retracement) to 0.7770 (61.8% expansion), but a break/close above the Fibonacci overlap may generate a near-term breakout, with the next topside region of interest coming in around 0.7835 (2016 high) to 0.7860 (61.8% expansion).

Currency	Last	High	Low	Daily Change (pip)	Daily Range (pip)
USD/JPY	104.46	104.63	103.13	129	150

USD/JPY Daily

Chart - Created Using Trading View

USD/JPY gaps higher as U.S. Election polls show Democratic nominee Hillary Clinton in the lead, with the advance in the exchange rate largely accompanied by a pickup in risk appetite; broader outlook for USD/JPY remains mixed as the pair retains the downward trend from earlier this year, while the RSI preserves the bullish formation carried over from the summer months.
A further pickup in risk appetite may keep USD/JPY afloat over the coming days, but the bullish sentiment surrounding the dollar-yen may largely unravel going into 2017 as the Bank of Japan (BoJ) Minutes suggest Governor Haruhiko Kuroda and Co. are in no rush to further embark on the easing-cycle; may see market attention shift to the 2017 monetary policy outlook following the U.S. Presidential election as the Federal Open Market Committee (FOMC) looks poised to deliver a December rate-hike.
A close above 104.20 (61.8% retracement) may spur another move at the 105.40 hurdle (50% retracement) following the failed attempt to push below the former-resistance zone around 102.70 (38.2% expansion).

The DailyFX Speculative Sentiment Index (SSI) shows the retail crowd remains net-long USD/JPY since July 21, with the ratio marking a 2016-extreme of +6.04 in September, while traders have been net-short AUD/USD since the start of November.
USD/JPY SSI sits at +1.73 as 63% of traders are long, with short positions 34.8% lower from the previous week as open interest stands 15.2% below the monthly average.
AUD/USD SSI sits at -1.36 as 42% of traders are long, with long positions 28.6% lower from the previous week, while open interest stands 4.2% below the monthly average.
Will keep a close eye on market participation as the USD/JPY SSI continues to narrow ahead of the U.S. Presidential election.

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