AUD/USD: Further weakness appears limited by 0.7050 – UOB

Further retracements in AUD/USD still looks likely, although the 0.7050 region is expected to hold the downside for the time being, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we highlighted that AUD ‘is likely to drift higher but is unlikely to break 0.7175’. AUD subsequently rose to 0.7171, plummeted to 0.7063 before snapping back up. The volatile price actions have resulted in a mixed outlook. For today, AUD could continue to trade in a choppy manner but is unlikely to move out yesterday’s broad range of 0.7063/0.7171.”

Next 1-3 weeks: “We have expected AUD to weaken since early last week. As AUD declined, we highlighted on Monday (29 Nov, spot at 0.7135) that AUD could break 0.7105 but deeply oversold conditions suggest it may not be able to maintain a foothold below this level. We did not anticipate the ease by which AUD cracked 0.7105 yesterday and plummeted to 0.7063. The decline was however short-lived as AUD rebounded quickly to end the day slightly lower at 0.7132 (-0.16%). The downside risk is still intact but any further weakness is likely limited to a test of 0.7050. A breach of 0.7205 (no change in ‘strong resistance’ level from yesterday) would indicate that AUD weakness has run its course.”