A breakdown of the 0.6170 region could force AUD/USD to lose further ground in the short-term horizon, suggest UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia.
24-hour view: “We indicated last Friday that ‘the large bounce in AUD has room to extend but in view of the overbought conditions, a sustained rise above 0.6350 is unlikely’. While AUD rose as expected, it did not break 0.6350 but instead, sold-off sharply from 0.6347 (AUD plummeted to a low of 0.6195 in late NY trade). The sharp and rapid drop appears to be overdone and AUD is unlikely to weaken much further. For today, we expect AUD to trade between 0.6190 and 0.6270.”
Next 1-3 weeks: “Last Thursday (13 Oct, spot at 0.6290), we held the view that the risk for AUD is on the downside but it has to break below 0.6200 before further sustained weakness is likely. After AUD dropped to 0.6170 and rebounded strongly, we indicated on Friday (14 Oct, spot at 0.6300) that ‘The price actions have diminished the odds of further AUD weakness’. However, we added, ‘only a break of 0.6380 would indicate that AUD is unlikely to weaken further’. AUD subsequently rose to 0.6347 before selling off sharply to a low of 0.6195. While the risk for AUD remains on the downside, it has to break and stay below 0.6170 within the next few days or the chance of further decline will diminish. On the upside, a breach of 0.6320 (‘strong resistance’ level was at 0.6380 last Friday) would indicate that AUD is unlikely to weaken further.”
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