USDCAD TECHS: Southbound

The AUD/USD had a range overnight of 0.6515-0.6540, Asia is trading around 0.6540. Risk built on the reversal in sentiment overnight and the USD drifted lower. The AUD/USD has found support and consolidated above 0.6500 overnight. Is that the end of the correction ? Does the end of the shutdown override all the concerns that seemed to be weighing on the market last week, time will tell. The AUD though will be one of the main beneficiaries while this positive sentiment dominates proceedings. The AUD/USD is probing the pivot around the 0.6550 area, a sustained push above here and the focus will turn back toward the 0.6650/0.6700 year highs.

• Bloomberg is reporting, “Australia's pension giants are adding currency risk as their offshore assets surpass half of all investments, with desire for diversification outweighing fears the US dollar's haven appeal is waning.”
• “Funds are wanting to run more currency exposure rather than less, seeing it as a diversifier, with the average currency exposure in default investment options rising to 22.8% from around 21% two years ago.” {NSN T5C2YIKK3NY8 <GO>}
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6350(AUD396m), 0.6450(AUD 644m), 0.6650(AUD391m). Upcoming Close Strikes : 0.6500(AUD1.22b Nov 12), 0.6750(AUD2.17b Nov 14)- BBG
• Data/Event: Westpac Consumer Conf, NAB Business Confidence

Fig 1: AUD/USD spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

• Treasuries look to finish weaker, near the middle of Monday's range - optimism buoyed as the US Govt shutdown appears to be nearer an end after eight Democrats broke formation with colleagues to reopen the Govt.
• Stocks rallied, led by chip makers while Health Care sector shares continued to decline in the second half - if the US Govt shutdown ends without an extension of Affordable Care Act (ACA) subsidies.
• Reactions across G10 do not surprise, with the boost to risk assets filtering through to the underperforming JPY, while supporting the likes of AUD, NZD and NOK.
• Treasury futures pare losses slightly (TUZ5 104-04.88, -1.88) after $58B 3Y note auction (91282CPK1) stops through: drawing 3.579% high yield vs. 3.589% WI; 2.85x bid-to-cover vs. 2.66x prior.
• No economic data Monday, Tuesday limited to NFIB Small Business Optimism at 0600ET. Markets open for Veterans Day "holiday" - may weigh on volumes Tuesday.

• RES 4: 0.6707 High Sep 17 and a bull trigger
• RES 3: 0.6663 2.0% 10-dma Envelope
• RES 2: 0.6644 76.4% retracement of the Sep-Oct bear leg  
• RES 1: 0.6537/0.6618 50-day EMA / High Oct 29
• PRICE: 0.6520 @ 16:31 GMT Nov 10 
• SUP 1: 0.6459 Low Nov 5
• SUP 2: 0.6440 Low Oct 14 and key support 
• SUP 3: 0.6415 Low Aug 21 / 22 and a bear trigger
• SUP 4: 0.6373 Low Jun 23   

Despite Monday’s early gains, a bearish short-term tone in AUDUSD remains intact. The recent breach of the 50-day EMA undermines a recent bullish theme. This has exposed the next key support at 0.6440, the Oct 14 low. Key resistance and a short-term bull trigger is at 0.6618, the Oct 29 high. Initial resistance to monitor is at 0.6537, the 50-day EMA. A clear break of the average would strengthen a bullish case.