In opinion of FX Strategists at UOB Group, the upside bias in the Aussie Dollar risks running out of steam in the next weeks.
Key Quotes
24-hour view: “We highlighted yesterday “AUD could test 0.7200 first before recovering” and added, “the next support at 0.7175 is not expected to come into the picture”. However, AUD crashed below 0.7200 and dropped sharply to a low of 0.7172 before ending the day just above the low (NY close of 0.7176). While the underlying tone is still weak, we have doubts about the sustainability of the current weakness in AUD. From here, a test of the 0.7150 major support is not ruled but for today, a sustained decline below this level is not expected. On the upside, only a move back above 0.7215 would indicate that the current weakness has stabilized (minor resistance is at 0.7200)”.
Next 1-3 weeks: “The rapid deceleration in AUD from last Thursday (08 Nov) peak of 0.7303 came as surprise. The ‘key support’ for our positive view at 0.7150 appears to be vulnerable and break of this level would indicate that the 0.7303 high is a short-term top. For now, there is still chance, albeit a rather slim one that AUD could stage another leg higher to test 0.7315. In other words, the odds for further AUD strength have diminished considerably. Looking forward, a break of 0.7150 would not alter the current neutral but would suggest AUD could consolidate and trade sideways for the next 1 to 2 weeks”.
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