AUDUSD
The AUDUSD pair made an impressive comeback on the back of the higher stock market in the United States. The US elections triggered a massive rally in the stock market, with Nasdaq 100 particularly strong.
As a consequence, the USD negative correlation with the stock market kicked in, sending the AUD higher. The curious thing is that the rise came on the back of massive new stimulus from the Reserve Bank of Australia (RBA).
The RBA delivered a massive new stimulus package, a combination of a rate cut, an increase in QE, and improving lending conditions. It lowered the cash rate to 0.1%, increased the QE by an additional AUD100 billion and lowered the rate on the Term Facility Lending program too. Yet, the AUD trades higher across the board, not only against the USD but also against the EUR.
The FOMC later today puts further pressure on the USD and a bid behind the AUDUSD pair. The argument is that the Fed may signal more easing now that the RBA and the BOE did so. The ECB is expected to ease in December as well, so this may be a coordinated global liquidity intervention.
If that is the case, the Fed today will signal more easing, further pushing the USD lower. However, at this point, the strength in the AUDUSD pair and weakness in the USD comes from the US elections and the higher stock market prices.
The decline from the top looks corrective. The market formed three waves to the downside, followed by another a-b-c that currently meets horizontal resistance.
Bears may want to wait for the AUDUSD pair to break above the highs in the previous wave a (0.7250) before going short and place a stop at the highs (0.7420). As for the target, a risk-reward ratio of 1:2 would do the trick.
