AUD/USD: Some consolidation looks likely near term – UOB

AUD/USD could move into a consolidative phase in the short-term horizon, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we expected AUD to strengthen last Friday, we were of the view that ‘a sustained rise above 0.7430 is unlikely’. Our view for AUD to strengthen was not wrong but we did not anticipate the rapid manner by which AUD popped to 0.7478 and the subsequent pullback. Deeply overbought conditions suggest that AUD is unlikely to strengthen further. For today, AUD is more likely to consolidate and trade between 0.7410 and 0.7470.”

Next 1-3 weeks: “Last Friday (03 Sep, spot at 0.7400), we highlighted that ‘a break of 0.7430 would not be surprising and would shift the focus to 0.7480’. Our view was not wrong as AUD subsequently soared to within a couple of pips of 0.7480 (high of 0.7478). From here, overbought shorterterm conditions could lead to a couple of days of consolidation first but AUD is likely to break 0.7480 later on. Only a breach of 0.7365 (‘strong support’ level was at 0.7340 last Friday) would indicate that the current AUD strength that started about 2 weeks ago (see annotations in the chart below) has run its course. Looking ahead, the next level to focus on above 0.7480 is at 0.7530.”