Commodity currencies jump on US fears

8 November, 2016

The Australian dollar has jumped higher again on the back of USD weakness, as non-farm payroll data was much weaker than expected coming in at 161K. But the main feature that has been disrupting the market is the US election with many worried about the likely outcome of the election over Trump vs Hillary. So far many have been calling for a Hillary win, but many are concerned that a number of Trump supports have not admitted to polls that they will indeed vote for Trump. The likelihood for the markets is a drop in the USD if Trump is elected, or a rise for the market if Hillary is elected. Back in Australia though things have been a little different, with retail sales beating estimates in the previous week to 0.6% (0.4% exp). However unemployment continues to be an issue with full time jobs losing ground over temporary ones, and now some analysts are expecting two rate cuts in 2017 if the data does not improve. I believe this is very much likely on the basis that does not seem to be improving, and also that the AUD continues to be a painful topic for Australian exports, as fixed interest investors continue to hunt for yield in the repressed market.

The AUDUSD has risen high on the charts in recent days and has touched on a strong level of resistance at 0.7730 and has started to slip backwards, however this wave forward goes against the recent bearish trend and for me is a bullish signal with profit taking at this level of resistance. Going forward a pull back to support at 0.7695 looks like a strong possibility before a push higher in the face of non-action from the Reserve Bank of Australia. Further resistance levels though above 0.7730 can be found at 0.7754 and 0.7791.

Oil has found itself under technical pressure in the market after the recent pressures caused by surpluses appearing in the US market after last week's came in strongly at 14.42M (1.51M exp). This in turn has caused a run on the oil market which has seen the bears take complete control and look to push it much lower than previously expected. With OPEC still struggling with infighting and lack of direction, it looks all the more likely that this will be drawn out for some time when it comes to cutting back on production. I would anticipate that some deal will be struck, but the timeframes around it are some time off.

Oil does like to bounce and support at 43.47 was all the market needed to do exactly that, with traders looking to find the floor in the market and hitting it square on. With that drop the bulls have looked to regain some control but resistance at 46.19 seems a little far off, and the reality of surpluses and aggressive oil traders is that the bears are likely to come back in swinging, it's more likely they are waiting to trade of the result of the US election in the next few days. 

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