Originally published by AxiTrader
Quick Recap
In what was a weird session overnight where forex and commodity relationships seemed more elastic than normal the Australian dollar is a little higher this morning. That's after another day when the Yen roosters ruled the roost pushing the US dollar lower and allowing other currencies to float higher.
Clearly the Aussie, like the Kiwi which was the best-performing currency besides the Yen in the past 24 hours, continues to retain the support of traders and investors. That's doubly possible now because speculative positions were cut so deeply last week. The question of where to next is the interesting one. I see a case building for a test and possible break toward 80 cents in the next 6 months.
What You Need To Know
The US presidential debate is going to be the big event on the global market's calendar today. It's a scene setter as we count down the final six weeks of the US presidential campaign. It's no overstatement to say this is probably the most important presidential debate for traders in years - possibly ever.
I say that because traders and investors have got themselves into a frenzy about what the impact of a Clinton or Trump victory on November 8 mean. Some investors like Mark Cuban, a Clinton supporter, say Trump will tank stocks - that would likely hurt the US dollar too. There are enough of these calls out their about the impact of a Trump presidency that even non-partisan traders are wondering what might happen if Trump wins.
Hillary Clinton is seen as more establishment and thus a steady hand on the tiller. So if she wins the debate stocks could reverse last night's fall and the US dollar get a little of its mojo back.
But Trump is more of an unknown, and uncertain quantity. Uncertainty is poison in markets and fear is not the friend of stocks. So with so many folks now caught in the "Trump is bad for stocks" paradigm it could become a self-fulfilling prophecy. It’s Keyne’s “beauty parade” analogy all over again.
That means the outcome of the debate this morning, and how it informs thinking on who is likely to be the next President of the Untied States, is a big deal for markets today.
And it's a big deal for the AUD/USD which remains relatively strong at 0.7630/50 - less than a cent below massive overhead trendline resistance.
You can see just how important this overhead resistance zone above 77 cents is for the AUDUSD in a very long term context in the weekly chart below.
The McKenna Mantra remains that I always respect trendlines unless or until they break. And the confluence of resistance between 0.7720 and the years high around 0.7830 (including the 38.2% retracement of the fall from 93 cents) means that this is a tough zone to break.
It's easy to see why above 77 cents is the supply zone.
But support remains strong for the Aussie dollar and it's worth thinking about the chance, I'd say 40% and rising at the moment, that we see the AUDUSD head to and through 80 cents in 2017.
Looking on the day and the 0.7580/7600 remains short term support. It held on the pulse lower late in Asia yesterday and is the key level short term traders are watching. Topside 0.7660/75 is resistance. If either side of this range breaks I'm looking for a half a cent move.
Have a great day's trading