After a change in risk appetite on Wednesday, the AUD fell below US$0.65. During the night, investors looked for safe assets because of uncertainty about the US midterm elections and a crisis in the cryptocurrency market.
The results of the midterm elections show that the race was closer than polls had predicted. The Republicans didn’t do their jobs well, so neither the House nor the Senate has a majority.
Short-term, political uncertainty may make people less willing to take risks, but in the long run, it should be good for the market and help AUD in the new year. The AUD couldn’t get above US$0.65, and it started going down toward the end of the local session. It kept going down overnight.
As worries about a cryptocurrency crisis spread to stocks and other financial instruments, people became less willing to take risks, which drove the AUD below US$0.6450. If the Fed and FOMC tell the market something different about the future, the market is likely to react strongly.
Another positive surprise will make the case for higher and longer periods of monetary policy tightening. On the other hand, a drop in price pressures could cause the AUD to rise again as the number of people calling for the Fed to slow rate hikes grows.
Conclusion:
As investors look at what the RBA said, the AUDUSD is moving toward 0.6400 in Asian trading on Thursday.