Australian Dollar: Pullback toward 0.7120 favoured against US Dollar – UOB

UOB’s Quek Ser Leang and Lee Sue Ann report AUD/USD volatility picked up as the pair spiked to 0.7181 before sliding to 0.7139, with intraday momentum now skewed lower but seen insufficient to reach 0.7120. Over one to three weeks, they judge the month-long Australian Dollar strength has ended and expect further pullback toward 0.7120, unless 0.7190 resistance breaks. Longer term, they still see scope for a move above 0.7200 toward 0.7280.

Aussie retreating after strong run

"24-HOUR VIEW: AUD declined to a low of 0.7152 on Monday and then rebounded to a high of 0.7171. When AUD was at 0.7165 in the early Asian session yesterday, we indicated that “while the increase in momentum suggests AUD could rebound further, it should stay within a 0.7155/0.7180 range.” We underestimated the volatility as after rising to 0.7181, AUD fell sharply to a low of 0.7139. Downward momentum is increasing, but not significantly. Today, AUD is likely to edge lower, but based on prevailing momentum, the major support at 0.7120 is likely out of reach. Resistance is at 0.7160; a breach of 0.7170 would mean that the current downward pressure has eased."

"1-3 WEEKS VIEW: On Monday (31 Aug, spot at 0.7160), we highlighted that “the almost month-long AUD strength has ended.” We also highlighted that AUD “could pull back further toward 0.7120.” There is no change in our view. On the upside, a breach of 0.7190 (‘strong resistance’ level previously at 0.7200) would indicate that AUD is more likely to range-trade rather than continuing to pull back. Looking ahead, the next level to watch below 0.7120 is 0.7105."