Australian dollar loses ground at the start of the week
AUD / USD is testing support at 0.7000 as the US Dollar continues to gain ground against a large basket of currencies.
The US dollar index is heading towards the closest resistance level at 94.20 due to increased demand for safe-haven assets ahead of the US presidential election. The new locks in Europe also put pressure on the GBP / USD and EUR / USD pair, providing support for the US dollar index. If the US dollar index goes above 94.20, it will move towards 94.50, which will be bearish for AUD / USD.
Today Australia reported that the manufacturing PMI fell from 55.4 in September to 54.2 in October, according to analysts’ forecasts. Meanwhile, building permits rose 15.4% month-over-month in September compared to analyst consensus which called for growth of just 1.3%.
Tomorrow, the Reserve Bank of Australia will announce its decision on interest rates. Analysts expect the bank to lower the interest rate from 0.25% to 0.1%. Traders will also pay attention to the Bank’s comments.
In the US, traders will focus on the upcoming Manufacturing PMI report which is expected to show the Manufacturing PMI fell from 53.2 in September to 53.3 in October. Tomorrow, the market will focus on the main event of the week – the US presidential election.
AUD / USD has stabilized below support at 0.7030 and is testing the next support level at 0.7000. If the AUD / USD manages to settle below this level, it will head to the next support at 0.6975.
Despite the strength of the recent downward movement, the RSI remains in moderate territory, so there is plenty of room to gain further downside momentum in case the right catalysts emerge. A move below the support level at 0.6975 will pave the way for testing the next support at 0.6925.
On the upside, the previous support level at 0.7030 will likely serve as the first level of resistance for AUD / USD. If the AUD / USD breaks this level, it will head to the next resistance at 0.7075. A move above 0.7075 will push AUD / USD towards the 20 EMA at 0.7090.
For an overview of all of today’s economic events, check out our economic calendar.