The Australian dollar declined during the course of Thursday’s session after a tight US presidential race had shaken the markets globally despite posting rally at one-month peak of its counterpart New Zealand.
Aussie edged higher at 0.03 percent and settled at US$0.7661, after posting session highs of US$0.7689 earlier in the day.
Market sentiment was driven in the wake of the election after several national polls claimed the Democrat Hillary Clinton’s lead against Republican Donald Trump.
Subsequently, many investors considered Mrs. Clinton as the candidate of the status quo, while Mr. Trump could cause a significant uncertainty if he becomes a leader of the world’s largest economy.
Senior currency trader Stephen Innes said, "The US election is certainly weighing on risk sentiment and distorting the landscape."
"I anticipate the street to remain very light on outright US dollar risk from now through the election day."
Aussie Dollar Climbs Ahead of China Data
As the local trade figures turned into positive and with the strong services data of China, it has sent the Australian dollar higher.
The local currency traded at 76.68 US cents, up from Wednesday’s close of 76.31 US cents.
Market analyst Ric Spooner stated that the Aussie was sent higher due to heightened uncertainties on the US presidential election, citing the bigger-than-expected fall in Australia’s trade deficit in September was outweighed.
"The trade data was important to the Aussie - better than expected on the back of higher prices," Mr Spooner said.
Meanwhile, Australia’s trade deficit sharply declined to $1.23 billion in September, from an earlier reading of $1.89 billion in August, beating market expectations.
Mr. Spooner claimed that the Aussie has found support from the strong Chinese services purchasing managers index (PMI) data, as the services sector had strongly grown.
Australian Dollar is Not Overvalued
It seemed that the NAB’s currency strategy team had assumptions on the currency after they recalibrated their fair value model for the pair’s exchange rate in order to take account of the key drivers of the currency’s value.
Based on recent reports, NAB’s co-head of global currency strategy Ray Atrill said that the present “persistent overvaluation” of the model since the half of the year had sent the bank to overview the drivers of Aussie value.
Current Stance of AUD/USD Pair
The chart below illustrates AUD/USD price action amid heightened expectations over the US election after reports claimed that Democrat Hillary Clinton is taking the lead against the Republican Donald Trump.
Given a consolidating movement of the pair, an upward trend is seen in today’s weekly session, which gives traders an opportunity to open Buy position as the pair is expected to move on the green in the next session.
As the pair is currently driven by mounting anticipations on the US elections, we conclude that it would move on the green as the today’s trade served as the third candle of the trend, suggesting market participants to open Buy positions.
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