Australian Dollar: Momentum points to higher levels against US Dollar – UOB

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note that AUD/USD has broken above significant resistance at 0.7015, with price action extending to 0.7021. In the next 24 hours, the Australian Dollar is expected to stay in a higher 0.6985–0.7025 range. Over 1–3 weeks, rapid momentum suggests scope for a rise toward 0.7045, while the broader 1–3 month view remains negative below 0.6835.

Short term bullish, medium term cautious

"24-HOUR VIEW: AUD soared to a high of 0.6992 two days ago. Yesterday, when AUD was at 0.6975, we highlighted the following: “While the sharp rise appears excessive, there is room for AUD to test 0.6995. The major resistance at 0.7015 is unlikely to come under threat. To keep the momentum going, AUD must hold above 0.6945, with minor support at 0.6960.” Our directional view was not wrong, but we did not expect the sharp rise that sent AUD to a high of 0.7021. AUD could continue to rise, but deeply overbought conditions suggest any advance could be contained within a higher range of 0.6985/0.7025."

"1-3 WEEKS VIEW: While we highlighted yesterday (15 Jul, spot at 0.6975) that “upward momentum is starting to build again,” we pointed out that “it is too early to determine whether AUD can break above the significant resistance at 0.7015.” We did not expect AUD to jump and break above 0.7015 (high was 0.7021). The rapid increase in momentum suggests AUD could rise toward 0.7045. The upside risk will remain intact as long as AUD holds above 0.6950 (‘strong support’ level was at 0.6930 yesterday)."