Conditions are severely overbought, but there appears to be enough momentum for the Australian Dollar (AUD) break clearly above 0.6800, but, given the overbought conditions, it remains to be seen if 0.6870 is within reach, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note.
A break above 0.6800 is getting more unlikely
24-HOUR VIEW: “We did not expect AUD to jump by 1.37% (NY close of 0.9797) last Friday. The 1.37% gain is the biggest 1-day advance this year. Predictably, after such a strong surge in a short span of time, conditions are severely overbought. However, there appears to be enough momentum for AUD to break clearly above 0.6800. The next resistance at 0.6870 is highly unlikely to come into view today. There is another resistance at 0.6830. On the downside, any pullback is not expected to threaten the support at 0.6745 with minor support at 0.6760.”
1-3 WEEKS VIEW: “In our most recent narrative was from last Thursday (22 Aug, spot at 0.6750), we indicated that ‘while upward momentum has slowed somewhat, it is too early to call for an end to the advance in AUD.’ We added, “provided that the ‘strong support’ level at 0.6660 is not taken out, AUD could continue to advance, possibly to last month’s high, near 0.6800.’ Last Friday, AUD jumped to within one pip of 0.6800, reaching a high of 0.6799. The outsized advance continues to suggest further AUD strength. However, given the overbought conditions, it remains to be seen if 0.6870 is within reach in the next 1 to 2 weeks. On the downside, the ‘strong support’ level has moved higher to 0.6710 from 0.6660.”
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