July 17, 2024 – The Australian Dollar (AUD) may see a further drop to 0.6705 as upward momentum fades and downward momentum increases slightly, according to UOB Group FX analysts Quek Ser Leang and Lee Sue Ann. The AUD is expected to trade with a downward bias, though a break below 0.6680 is unlikely.
Short-Term Outlook: Testing 0.6680
In the short-term view, the analysts noted that the AUD’s underlying tone has softened significantly. Contrary to their earlier expectation of a lower trading range between 0.6740 and 0.6785, the AUD fell sharply to a low of 0.6715, closing at 0.6734 (-0.38%). Despite the sharp drop appearing overdone, the lack of stabilisation suggests that the AUD could fall further to 0.6705. The major support level at 0.6680, however, is not expected to come under immediate threat. Resistance levels are set at 0.6745 and 0.6760.
Medium-Term Outlook: Downward Bias Persists
Since the beginning of the month, UOB Group had adopted a positive stance on the AUD. In their latest commentary from July 12, with the AUD spot at 0.6765, they indicated that while there was room for the AUD to continue rising, it needed to surpass 0.6800 for further advances. However, they also noted the overbought conditions and uncertainty regarding the AUD’s ability to break above 0.6800.
The sharp decline of the AUD below the strong support level of 0.6735 has changed the outlook. Upward momentum has dissipated, and downward momentum has slightly increased. Consequently, the analysts now expect the AUD to trade with a downward bias. Despite this, the AUD does not appear to have sufficient momentum to break the major support at 0.6680 at this time. Conversely, an upside breach of 0.6775 would indicate that the current modest downward momentum has eased.
Conclusion
The Australian Dollar’s recent performance indicates a likely continuation of its downward trend, potentially testing the 0.6705 level. While major support at 0.6680 is unlikely to be breached in the near term, traders should watch for any movement past the resistance levels of 0.6745 and 0.6760, which could signal a shift in momentum.
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