AUD/USD faces solid resistance around 0.6875 – UOB

In the opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, further upside in AUD/USD is expected to meet a tough barrier around 0.6875 in the near time.

Key Quotes

24-hour view: “We highlighted last Friday that ‘oversold conditions coupled with early signs of slowing momentum suggest AUD is unlikely to weaken much further’ and we expected AUD to ‘trade between 0.6700 and 0.6780’. However, AUD rose to a high of 0.6807 before closing on a firm note at 0.6793 (+0.66%). Upward momentum is beginning to build and the risk for today it tilted to the upside. That said, as upward momentum is only beginning to build, any advance is not expected to challenge the major resistance at 0.6875 (there is another resistance at 0.6840). Support is at 0.6785 but only a break of 0.6760 would indicate that the build-up in upward momentum has fizzled out.”

Next 1-3 weeks: “Last Tuesday (12 Jul, spot at 0.6740), we indicated that AUD could drop below 0.6700 but the chance for AUD to break 0.6650 is not high. After AUD dropped to 0.6683 and rebounded, we highlighted last Friday (15 Jul, spot at 0.6745) that while downward momentum has improved slightly, the odds for a break of 0.6650 have not increased by much. AUD subsequently rebounded strongly to a high of 0.6807 before extending its advance during early Asian hours. While our ‘strong resistance’ level at 0.6815 was not breached, downward momentum has dissipated. In other words, the weakness in AUD has run its course. The current rebound could extend but any advance is expected to face solid resistance at 0.6875. On the downside, a break of 0.6735 (‘strong support’ level) would indicate that AUD is unlikely to rebound further.”