AUD/USD could hold a broader range of 0.7250-0.7850 through US elections – ANZ Research

The ANZ Research team believes the Aussie-Dollar pair is likely to hold the range of 0.7250-0.7850 irrespective of the US election outcome.

Key quotes

In terms of judging the (election) impact it can have on the AUD, the way the AUD traded on Brexit Day provides some guide. On the day the AUD dropped 300 pips and we think this provides a reasonable guide as to what would happen in the event of a Donald Trump victory, as market volatility is certain to rise.

Conversely, while we think a Hillary Clinton victory would be greeted with a relief rally, we do not think the Brexit framework provides a good guide as to the scope of the rally that could ensue in the AUD. While there is some risk that the recent resistance at USD0.7720 breaks, a challenge of the broader range top at USD0.7850 remains  unlikely. More broadly, we continue to think the broader USD0.7250-0.7850 range should hold for the AUD, so any moves towards either of these extremes should be faded.

One week implied volatility, which now encapsulates the timing of the election, highlights that any strong views on the election remain good value as it sits right in the middle of the range at 12 vol points. This compares with a recent low of 8 and a Brexit high of 20.