- AUD / USD is witnessing a sharp turn after an initial move to multi-week highs.
- Tighter-than-expected US election results fuel some aggressive money flows to the USD.
- A sharp decline in equity markets benefits the safe-haven USD and contributes to the pair’s decline.
The pair AUD/USD keeps the sales tone intact during the European session on Wednesday, trading at the time of writing around the 0.7080 region, after having had good price movements in both directions during the Asian session.
The pair retraces from intraday high above 0.7200 level, on three-week highs, amid a strong rebound in demand for the US dollar. The fact that the first results of the US elections have indicated a tighter-than-expected run for the White House, has caused investors to rush to buy the US dollar to hedge their positions.
Meanwhile, the current president Donald Trump has called the election a fraud and said he plans to go to the Supreme Court. Political uncertainty in the United States has weighed on global risk sentiment. This has been evidenced by a sharp drop in US stock market futures, which has provided an additional boost to the safe haven USD.
The overall strength of the USD, coupled with pessimistic market sentiment, has put heavy pressure on the higher perceived risk Australian dollar. However, the AUD / USD pair has managed to find some support near the 0.7050 region as market participants now appear reluctant amid growing wariness about the actual outcome of the US elections.
It is worth mentioning that there will be a delay in the results of key states on the battlefield, such as Wisconsin, Michigan and Pennsylvania. Greater uncertainty could continue to prop up the USD as a safe haven and limit any significant recovery attempts for the AUD / USD pair.
Wednesday’s US economic releases, with the ADP report on private sector employment and ISM’s services PMI, are likely to be overshadowed by political developments in the world’s largest economy.
Credits: Forex Street
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