FX Strategists at UOB Group still see AUD/USD testing the 0.7110 region in the near term.

Key Quotes

24-hour view: “Last Friday, we held the view that the “short-term rally is running ahead of itself” and that “AUD is more likely to consolidate its gains and trade sideways”. AUD subsequently traded between 0.7038 and 0.7082, relatively close to our expected 0.7035/0.7085 range. The consolidation phase appears incomplete and AUD is expected to continue to trade sideways for now, albeit likely at a lower range of 0.7020/0.7065”.

Next 1-3 weeks: “After ‘hesitating’ below the major 0.7050/70 resistance zone for a couple of days, AUD suddenly blew past these major resistance levels and closed at a 3-month high of 0.7075 (thanks to dovish Fed-speak). As highlighted since Tuesday (16 Jul, spot at 0.7040), if AUD were to move and stay above 0.7070, it could extend its gains to 0.7110. All in, the mid to long-term outlook for AUD has turned brighter and if it can clear the major 0.7110 hurdle, it would suggest last month’s 0.6832 low could be a significant bottom (from the perspective of multiweeks). Meanwhile, the strong upward pressure in AUD could carry it higher to 0.7110 (next resistance is at 0.7150). On the downside, only a break of the 0.7000 ‘key support’ (level was a strong support at 0.6980 yesterday) would indicate that the current ‘positive phase’ in AUD has ended”.

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