Australian Dollar: UOB maintains neutral outlook after sharp recovery from lows against US Dollar

AUD/USD rebounded sharply to 0.7022. United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note that the pair briefly touched 0.6954 before recovering as risk appetite strengthened and the US Dollar weakened. With the intraday rally looking overdone, they expect trading within 0.6985–0.7025. The failed downside break has also prompted a shift to a neutral one-to-three-week stance, with consolidation anticipated between 0.6970 and 0.7040.

0.6970–0.7040 range expected after failed downside break

"24-HOUR VIEW: AUD fell more than we expected two days ago, reaching a low of 0.6962. Yesterday, we stated that “conditions are deeply oversold, and “AUD is unlikely to weaken much further,” and we held the view that AUD “is likely to consolidate between 0.6960 and 0.6995.” The subsequent price movements did not unfold as expected. AUD dipped to 0.6954 and then staged a sharp rebound, reaching a high of 0.7022. The sharp advance appears to be overdone, and AUD is unlikely to strengthen much further. Today, AUD is more likely to range-trade between 0.6985 and 0.7025."

"1-3 WEEKS VIEW: We turned negative on AUD two days ago (03 Nov, spot at 0.7000). Yesterday (04 Nov, spot at 0.6970), we highlighted the following: “Further downside in AUD is not ruled out, but oversold short-term conditions could slow the pace of any declines, and 0.6935 may not come into view so soon. On the upside, a breach of 0.7015 (‘strong resistance’ level) would mean that AUD is not declining further.” However, after declining to a low of 0.6954, AUD surged and broke above our ‘strong resistance’ with a high of 0.7022. We are neutral on AUD now and expect it to trade between 0.6970 and 0.7040 for the time being."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)