Mexican pesoOriginally published by AxiTrader
Quick Recap
The Australian dollar fell to a low of 0.7576 yesterday amid the acute weakness in Asian markets after the news broke that Donald Trump was on the march toward the US presidency. But even though there was sharp weakness across global stocks, bonds were rallying and Gold was ripping higher as buyers found the will to buy off the current uptrend line.
That reinforces the underlying support for the Aussie dollar right now, although the RBNZ rate cut this morning has dragged it a little lower.
The big question of what's next looms large on the horizon.
What You Need To Know
After the lessons of the many global elections in the past year and the Brexit vote it was always dangerous to assume a Clinton victory while the polls were still open. I've written so often about the impact of inequality and the social movement it has spawned this year that when I saw a Reuters poll of 10,000 voters yesterday morning it was clear Trump was a real chance.
And as I wrote yesterday morning all bets would be off for the Aussie dollar's rally if Trump did prevail. But I didn't expect the Aussie to get hammered because there are so many positives in its favour right now - we've talked about them a lot in recent days.
So it's no surprise that the Aussie dollar found support again near the base of the current uptrend in the past 24 hours.
But has the outlook changed for the Aussie given the moves in markets?
I think it has to a certain extent. I think if Trump delivers on his campaign promises then we face a more volatile global economic and geopolitical environment in the years ahead. But as my colleague Milan Cutkovic highlighted earlier today, stocks rallied overnight because they focused on the specificity of tax cuts and infrastructure spending and the effect that will have on the market and the economy.
But the weakness in bonds - US 10's moved 28 points from the 1.73% low yesterday to the close at 2.05% - and the 9% loss in the Mexican peso means there is a certain specificity to the way traders were viewing these moves.
For the Aussie that means it benefits from the reflationary aspects of Trumponomics, but could suffer from the rise in US bonds, and likely Fed hike in December if Australian interest rate markets don't go with those moves higher.
Likewise overall geopolitical uncertainty, and geopolitical risk - especially if Trump follows through on his plans to hit China with tariffs could hurt.
But if I distil everything into my 5 key drives my medium term view of 80 cents in 2017 remains. But for the moment the outlook is mixed and the AUD/USD may need to retest support to embolden the bulls once more. Support remains in the 0.7570/90 region resistance is around 0.7695 then 0.7730/50.
Have a great day's trading