AUD/USD to grind higher towards its resistance at 0.6800 – UOB

FX Strategists at UOB Group noted that the recent sharp pullback in AUD/USD could have met important support in the 0.6680 area.

• "24-hour view: “Both AUD’s drop to a low of 0.6678 and the subsequent recovery back to 0.6760 was a surprise to us. The v-shaped recovery appears to be a capitulation of the last AUD bulls and the undertone may gradually improve from here. However, AUD is unlikely to transit to a ‘positive phase’ as yet until prices sustain above resistance at 0.6810. On the downside, expect supports are 0.6700 and 0.6680”.
• Next 1-3 weeks: “Our last narrative was from 31 Jul (spot at 0.6805) was that a ‘sustained push below 0.6800 could shift focus to 0.6715’. Since then, AUD struggled to recover despite oversold conditions and on Wed, AUD tumbled to fresh lows of 0.6678. At the same time, the v-shaped recovery that followed suggested that the last of AUD bulls may have capitulated. Directional indicators though still negative are gradually turning higher. From here, improving upside momentum suggests AUD to grind higher towards its resistance at 0.6800. It has to break the 0.6845 ‘key resistance’ in order to indicate that a mid-term low is in place at 0.6678. On the downside, we expect supports at 0.6715 and 0.6680”."