Forex Market: AUD/USD rebounds from a two-month low as RBA rate cut expectations now pushed back to November

AUD/USD continued its rebound from last Friday’s two-month low on Tuesday, as market expectations of a rate cut by the Reserve Bank of Australia were pushed back to November from a policy meeting next week. Additional support for the Aussie came with improving risk sentiment across a range of markets.

Yesterday Westpac analysts revised their RBA rate projection, noting that easing measures will likely be introduced in November.

“Media reports downplaying an October RBA move are just too hard to ignore,” Prashant Newnaha, Asia-Pacific rates strategist at TD Securities, said.

“In our view the main benefit the RBA would obtain from waiting till (November) would be clarity on Federal and State budgets to help it calibrate its QE program.”

Meanwhile, market focus now sets on the first US presidential election debate between Republican Donald Trump and Democrat Joe Biden, scheduled at 1:00 GMT on Wednesday.

“If the debate puts Trump on the back foot and Biden keeps his lead, I think it could lead people to let go of their dollars,” Daisuke Karakama, chief market economist at Mizuho Bank, said.

“The dollar market has been broadly bottoming out from low prices since mid-September. The question is what would be the trend in October.”

The US Dollar slipped from a two-month high against major peers, registered last Friday, and was little changed at 94.26 on Tuesday.

As of 6:54 GMT on Tuesday AUD/USD was edging up 0.33% to trade at 0.7092, after earlier touching an intraday high of 0.7096, or a level not seen since September 23rd (0.7177). The major pair has retreated 3.90% so far in September, following five consecutive months of gains.

On today’s economic calendar, at 13:15 GMT Federal Reserve President for New York John Williams is to provide keynote remarks at the 2020 US Treasury Market Conference webinar via webcast.

At 13:30 GMT Federal Reserve President for Philadelphia Patrick Harker is expected to speak at the Official Monetary and Financial Institutions Forum: The Economics of Artificial Intelligence and Machine Learning via webcast.

And a monthly report by the Conference Board research group at 14:00 GMT may show confidence among US consumers improved in September. The respective gauge probably rose to a level of 89.5 in September, according to market expectations, from 84.8 in August.

Bond Yield Spread

The spread between 2-year Australian and 2-year US bond yields, which reflects the flow of funds in a short term, equaled 5.0 basis points (0.050%) as of 6:15 GMT on Tuesday, up from 3.9 basis points on September 28th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.7057
R1 – 0.7086
R2 – 0.7103
R3 – 0.7132
R4 – 0.7160

S1 – 0.7040
S2 – 0.7011
S3 – 0.6994
S4 – 0.6977