AUD Recovers Losses as Democrats Poised to Win Both Houses

The Australian dollar rebounded from two-week lows against the US dollar on Wednesday, trading at 0.69832. Over the previous two sessions, the Aussie had been sold off notably due to a stronger greenback and uncertainty surrounding the US midterm elections, briefly breaking below the 0.7000 handle. With the latest election signals suggesting Democrats are poised to win both the Senate and the House, market risk appetite has improved, helping the Aussie recoup some of its losses.

**Election expectations dominate short-term sentiment**

Market participants broadly believe that a full Democratic victory could pave the way for larger fiscal stimulus measures, which would boost economic growth prospects and enhance overall risk sentiment. Against this backdrop, the risk-sensitive Australian dollar has attracted buying interest. However, the US dollar remains broadly soft, and investors are staying cautious until the final election results are confirmed, limiting the Aussie's upside potential.

**Technical resistance persists overhead**

Despite the short-term rebound in the Aussie, the technical picture has yet to turn bullish. On the daily chart, AUD/USD remains below several key moving averages, with the 100-day simple moving average around 0.7031 serving as initial resistance. The Relative Strength Index sits in a weak zone near 42, indicating insufficient upward momentum. A decisive break above the 0.7031 resistance could open the door for a further test of 0.7058; conversely, if risk sentiment deteriorates again, initial support lies at 0.6833.

**Focus on upcoming risk events**

Beyond the US election results, market attention is gradually shifting to the upcoming US CPI data and the Australian employment report. According to market indications, these data will offer crucial clues for the future policy paths of the Federal Reserve and the Reserve Bank of Australia. Although the RBA delivered a widely expected rate hike earlier this week, it struck a relatively dovish tone, leaving the medium-term trajectory of the Aussie dependent on the degree of policy divergence between the two major central banks and shifts in global risk sentiment.