Oct 27 (Reuters) - The Australian dollar was surprisingly resilient in Monday's trading given steep losses on Wall Street and global growth concerns related to the second wave of coronavirus infections sweeping across the U.S. and Europe . Whether the resilience is temporary or represents a shift in what is driving the price action will likely be determined by technical indicators.
The reason for the breakdown in correlation between the AUD/USD and S&P 500 is hard to pinpoint, but it may be due to the stark contrast between the alarming rate of infections and accompanying social restrictions in the northern hemisphere and the diminishing presence of the virus in the southern hemisphere, including Australia . The contrast is likely to continue as the northern hemisphere enters the winter flu season.
AUD/USD support has formed ahead of 0.7100 and a break below 0.7085 would likely lead to a test of support between 0.7000-20. There is solid resistance just ahead of 0.7160 where Friday's high and the 61.8 Fibonacci retracement of the 0.7243-0.7021 drop converge. A clear break above 0.7160 would open the way to another test of the 0.7220-50 resistance.
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(John Noonan is a Reuters market analyst. The views expressed are his own)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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