After news filtered through that the Democrats would gain control of the House, the Aussie dollar continued its edge upward, now trading at US$0.728.
Below is its one-month chart:
While its performance has been solid for the past two weeks, it remains to be seen if it can sustain the current rally.
US Elections impact Aussie dollar
The US midterm elections brought with them the prospect of policy deadlock occurring and the potential risk of slower economic growth.
The really interesting angle here is that there may be bipartisan push by the Republicans and Democrats alike to modify Section 232 of the Trade Expansion Act.
This modification would likely hamper Trump’s ability to impose tariffs on goods, and could work in favour of a de-escalation of the US-China trade war.
All of these factors drove the AUD higher as FOREX traders keep their attention locked on the release of Chinese trade balance data for October later today.
Aussie dollar may enter period of volatility
There are a few conflicting factors that may drive the Aussie dollar into a period of volatility.
Technically speaking, the Aussie dollar has been trading downwards since late January of this year.
While recently released trade balance data has been positive, this is mostly on the back of iron ore prices.
A sharp downturn in iron ore prices amid slowing Chinese growth could lead to some downward pressure.
Additionally, there are still questions about interest rate differentials between the US and Australia, with the RBA keeping interest rates low and the US poised to hike rates.
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