Australian Dollar: Downside risk persists against US Dollar - UOB

UOB’s Quek Ser Leang and Lee Sue Ann note AUD/USD has pulled back after Monday’s sharper-than-expected drop, with intraday price action now seen confined to a 0.7100–0.7140 band. For the next 1–3 weeks, they maintain that further downside is possible, with a close below 0.7100 opening the way toward 0.7050, while resistance is capped near 0.7175.

Downside bias while below resistance

"24-HOUR VIEW: AUD fell more than we expected on Monday. Yesterday, we highlighted the following: “Our call for AUD to weaken was not wrong, but we did not anticipate the sharp drop that reached a low of 0.7109. The decline appears to be overdone, and AUD is unlikely to weaken much further. Today, AUD is more likely to consolidate between 0.7110 and 0.7155.” AUD then traded within a range of 0.7117/0.7141. Downward momentum has increased, albeit slightly. Today, AUD could edge lower, but any decline should stay within a 0.7100/0.7140 range."

"1-3 WEEKS VIEW: We continue to hold the same view as yesterday (15 Sep, spot at 0.7135). As highlighted, “while further weakness is not ruled out, short-term conditions are oversold, and AUD must close below 0.7100 before a move to 0.7050 can be expected.” The likelihood of AUD closing below 0.7100 will remain intact as long as AUD holds below the ‘strong resistance’ at 0.7175 (no change in level from yesterday)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)