Australian Dollar: Rally targets 0.7070 cap against US Dollar despite overbought conditions – UOB

Trading near 0.7036, AUD/USD has again outpaced the short-term upside expectations of United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann. They see room for further gains, although momentum is easing and resistance at 0.7045–0.7070 is expected to limit the advance. The strategists have shifted to a positive 1–3 week outlook, with a target of 0.7070 and strong support raised to 0.6985. Their earlier 1–3 month assessment had flagged downside risks towards 0.6923 and 0.6866.

Aussie gains approach resistance

"24-HOUR VIEW: After AUD rose more than we expected on Tuesday, we highlighted the following yesterday: “We did not expect upward momentum to strengthen so quickly as AUD soared to a high of 0.7017, closing 0.34% higher at 0.7003. While further AUD strength is not ruled out, negative divergence is forming on momentum indicators, and any advance is likely to stay within a range of 0.6985/0.7020.” AUD once again rose more than we expected, reaching a high of 0.7036. Today, there is a chance for AUD to rise further, but slowing momentum and overbought conditions suggest any advance is unlikely to break above 0.7045. We do not expect the major resistance at 0.7070 to come into view. Support is at 0.7015; a breach of 0.7005 would indicate the advance is pausing."

"1-3 WEEKS VIEW: We revised our AUD view from neutral to positive yesterday (21 Oct, spot at 0.7005). We indicated that “upward momentum is starting to build, and AUD could rise toward 0.7035 as long as it holds above the ‘strong support’ level, currently at 0.6965.” We did not expect AUD to reach 0.7035 so quickly as it rose to a high of 0.7036. AUD could advance further, though the next technical target at 0.7070 may not come into view so soon. On the downside, the ‘strong support’ level is now at 0.6985."

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