Australian Dollar: Neutral after sharp rebound from lows against US Dollar – UOB

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note that AUD/USD briefly dipped to 0.6954 before rebounding strongly to 0.7022 as risk appetite improved and the US Dollar softened. They see the intraday move as overdone, expecting a 0.6985–0.7025 range, and have shifted to a neutral one-to-three-week stance, looking for consolidation between 0.6970 and 0.7040 after the prior downside break failed.

Range trading expected after failed downside

"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.)