In light of the recent price action, the upside phase in AUD/USD could have come to an end, suggested FX Strategists at UOB Group.
24-hour view: “We highlighted yesterday that AUD ‘could continue to rise but in view of the still overbought conditions, it is unlikely able to maintain a foothold above the major resistance at 0.8000’. While AUD rose to a high of 0.8005, the subsequent sharp sell-off came as a surprise (AUD dropped to 0.7823 after NY close). The rapid decline appears to be overdone but there is room for AUD to test 0.7800 first before the current weakness should stabilize. Resistance is at 0.7880 followed by 0.7925.”
Next 1-3 weeks: “We have held a positive view in AUD for more than 2 weeks now. In our latest narrative from yesterday (25 Feb, spot at 0.7970), we noted that ‘overbought shorter-term conditions could slow the pace of advance but a break of 0.8000 would not be surprising and would shift the focus to 0.8030’. AUD subsequently cracked 0.8000 (high of 0.8005) before staging a surprising sharp sell-off. The break of our ‘strong support’ at 0.7870 indicates that the positive phase in AUD has come to an end. The current movement is viewed as the early stages of a consolidation phase. That said, the near-term bias is titled to the downside but for now, any weakness is viewed as part of a 0.7750/0.7950 range.”