UOB Group’s FX analysts, Quek Ser Leang and Peter Chia, have shared their insights on the AUD/USD currency pair, suggesting that its downward momentum has increased slightly. According to their analysis, the Australian Dollar (AUD) is likely to edge lower against the US Dollar (USD), although it may not reach the 0.5870 level in the near term. In the longer run, further declines are still on the table, but given the current deeply oversold conditions, it remains uncertain whether the AUD can reach the next significant support level at 0.5870.
Short-Term Outlook: Limited Downside, but Bearish Bias Persists
24-Hour View
After the AUD experienced a sharp plunge last Friday and Monday, the analysts noted on Tuesday that the decline seemed excessive. They initially predicted that instead of continuing to fall, the AUD would trade within a range of 0.5945 – 0.6110 on Tuesday. While the pair did trade within a range, it was narrower than expected, fluctuating between 0.5947 and 0.6085 and closing near the lower end at 0.5956, a 0.55% decrease.
Now, with a slightly increased downward momentum, the analysts expect the AUD to edge lower. However, they believe that the current momentum is not strong enough for the currency pair to reach the major support level at 0.5870. There is an intermediate support level at 0.5900. For the downward momentum to sustain, the AUD should not break above 0.6025, with a minor resistance level at 0.5980.
Medium-Term Outlook: Uncertainty Surrounds Further Declines
1 – 3 Weeks View
The AUD’s sharp decline last Friday and its continued fall on Monday have set a bearish tone. As of Tuesday, April 8, when the spot rate was at 0.6005, the analysts had already stated that although further declines could not be ruled out, it was unclear if the AUD could reach the 0.5870 support level due to the deeply oversold conditions. They maintain this view.
In the medium term, the analysts believe that only a breach of the 0.6155 level (the’strong resistance’ level was 0.6185 on Tuesday) would indicate that the current downward pressure on the AUD/USD pair has eased. Until then, the pair remains in a vulnerable position, with the potential for further downward movement, but the extent of such a move remains uncertain.
For investors trading the AUD/USD pair, these insights from UOB Group are crucial. Short – term traders need to be cautious about the limited upside potential and the risk of further downward movement. Long – term investors should closely monitor the key support and resistance levels, as any significant break could signal a shift in the pair’s trend.
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