AUD/USD: Bulls are set to test 0.6700 before a pause is likely – UOB Group

Sharp bounce appears to be overdone, but there is a chance for the Australian Dollar (AUD) to test 0.6700 before a pause is likely. In the longer run, there has been a slight increase in upward momentum; AUD could rise gradually and test 0.6720, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

AUD can rise gradually and test 0.6720

24-HOUR VIEW: “AUD dropped sharply to 0.6513 two days ago, and then rebounded. Yesterday, when AUD was at 0.6570, we indicated that ‘The bounce from the low has resulted in a slowdown in momentum.’ We added, ‘instead of weakening further, AUD is likely to trade in a 0.6530/0.6610 range.’ AUD did not weaken further, but instead of trading in a range, it surged to a high of 0.6688, closing on a strong note at 0.6681, up by 1.69% for the day. The sharp bounce appears to be overdone, but there is a chance for AUD to test 0.6700 before a pause is likely. A sustained rise above 0.6700 is unlikely. On the downside, a breach of 0.6620 (minor support is at 0.6645) would mean that the current upward pressure has faded.”

1-3 WEEKS VIEW: “We pointed out yesterday (07 Nov, spot at 0.6570), that despite AUD dropping to a low of 0.6513 two days ago, ‘there has been no significant increase in momentum.’ While we held the view that ‘there is potential for AUD to decline to 0.6500,’ we indicated that ‘the likelihood of a sustained break below this level is not high.’ We did not anticipate the subsequent sharp reversal, as AUD soared and broke above our ‘strong resistance’ level at 0.6640 (high of 0.6688). Although there has been a slight increase in upward momentum, it is not enough to suggest a strong advance. That said, there is room for AUD to rise gradually, but any advance is likely limited to a test of 0.6720. We will maintain our view provided that AUD remains above 0.6590.