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The Aussie has more to gain
The Aussie’s upside momentum loses pace against the US dollar as the pair approaches the critical 0.7380/0.7400 resistance zone.

Euro rallied the most in three months to 1.50 hurdle on the ECB disappointment. But although the ECB’s 10 basis point cut on its deposit rate fell short of market expectation, it is just a matter of time before the widening rate differential turns into an appetising deal for the carry traders.

As the carry cash flows in, investors should keep in mind that the macroeconomic conditions in Australia give flexibility for additional rate cut in the foreseeable future and the RBA will certainly feel uncomfortable should the Aussie appreciate too much. RBA’s Stevens is well aware that the simplest way to halt the carry euphoria is to lower the RBA’s cash target rate.

Technically, the mid-term critical resistance remains at 0.7380 (Fib 38.2%). Below 0.7380, the wider outlook remains negative and we see opportunity in selling the rallies targeting 0.70c. Above 0.7380, the 200-day moving average (0.7463) should shelter the Aussie bears.

Oil prices may take another hit on Saudi’s determination to not leave a single drop on the table.

The WTI remains under pressure as OPEC will certainly keep the production as it is. The event risk is high today and the $40 support could well come under pressure if Saudi remains on its position to keep on fighting for market share rather than compromising on prices.
The short-term resistance is eyed at $41.55 (pivot), more offers are presumed at $43.60 (Fib 50% on Nov 3 – 20 drop). On the downside, buyers are eyed at pre-$40; a break of this level could lead to further losses down to $39.10/38.90