AUD/USD: Dwindling bets for a deeper pullback – UOB

In the view of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, the prospects for further decline in AUD/USD seems to be losing momentum for the time being.

Key Quotes

24-hour view: Last Thursday, AUD dropped to 0.6514 and then rebounded. On Friday, we highlighted, “Oversold conditions, coupled with early signs of slowing momentum, suggest low downside risk”, and we expected AUD to trade between 0.6530 and 0.6595. In NY trade, AUD dipped to 0.6541, rebounded strongly to 0.6610, and then pulled back to end the day at 0.6571 (+0.33%). The price movements appear to be consolidative, and today, we continue to expect AUD to trade in a range, probably between 0.6540 and 0.6600. 

Next 1-3 weeks: We have held a negative AUD view for about 2 weeks now. In our most recent narrative from last Thursday (03 Aug, spot at 0.6535), we highlighted that “while severely oversold, the weakness in AUD could extend to the year’s low near 0.6460.” On Friday, AUD rebounded to a high of 0.6610. Downward momentum is beginning to wane, and the chance of AUD dropping to 0.6460 is beginning to diminish. However, only a breach of 0.6620 (no change ‘strong resistance’ level) would indicate that AUD is not weakening further.