AUD bulls support threatened

20 oct. 2020

• AUD/USD extends its four-day losing streak into Tuesday, looking to threaten the September low of 0.7006 while wallowing in three-week lows near 0.7032.
  
• AUD futures net positions dropped from 8.9k to 3.8k as 10k+ short positions were opened.
  
• Growth in China is slower than expected hence Australian exports to the Asian country could be affected. This coupled with the ongoing trade tensions between the two countries threatens the strength of the AUDUSD.
  
• The expectations of a November rate cut and or bond-buying expansion emboldened after the Reserve Bank of Australia’s (RBA) Deputy Governor Dr. Chris Kent and October meeting minutes suggested that additional easing is due on the cards.
  
• Further pressurizing the downside in the spot, the US dollar holds onto the overnight bounce, as hopes of a potential US fiscal stimulus deal pre-election fade despite the narrowing differences between the House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin.
  
• DXY net positions in the CFTC COT Weekly report turned positive last week hence we could expect a bullish dollar in the medium term, well at least until the US elections are over. Equity markets are currently on a risk on mode after erasing gains made earlier on Monday. Further concerns about the pandemic globally will keep pressure on the safe haven as more countries start to consider placing strict lockdown measures.