The greenback weakened against most of its G10 counterparts after Congress failed to strike a deal on the budget, driving the US government to its first partial shutdown in 17 years. The dollar moved to an eight-month low against the euro and to a nine-month low against sterling during the European morning. After rising vs the yen in US trading Monday, it gave back yesterday’s gains and returned to its prior downward path. AUD and SEK recorded the biggest gains against USD. USD/SEK moved lower after the Sweden’s manufacturing PMI for September jumped sharply to 56.0, beating estimates of 52.1. AUD/USD moved higher after the RBA decided to hold the cash rate unchanged at 2.5% and said the full effects of easing up to now, “are still coming through, and will be for a while yet.” That implies no need to ease further for the time being. The AUD strengthened as a result. I think it’s likely that lowered expectations for US interest rates in the wake of the government shutdown, which may delay the Fed’s tapering, could also prove beneficial for the AUD in the near future.
The AUD/USD rallied during the European morning, escaping from the blue downtrend channel and breaking two resistance barriers in a row (current support levels). The rate is currently trading slightly above the 0.9401 (S1) support, with the longs willing to challenge the next hurdle at 0.9456 (R1). Additionally, the 20-hour moving average achieved a cross above the 200-hour moving average and alongside with MACD indicating strong bullish momentum, it seems likely that the pair is establishing a new short-term uptrend. On the daily chart, the pair rebounded from the 0.9281 (S3) support level, confirming the validity of a double bottom reversal formation.
• Support levels are identified at 0.9401 (S1), followed by 0.9351 (S2) and 0.9281 (S3).
• Resistance is at 0.9456 (R1), followed by 0.9482 (R2) and 0.9523 (R3).
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