United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note that AUD/USD briefly broke above 0.7200 to 0.7208 before reversing to 0.7158. Intraday, they expect further pullback toward 0.7145, with limited downside and resistance at 0.7170/0.7185. Over the next weeks, they judge that the prior AUD strength has ended, with scope for a deeper retreat toward 0.7120.
Australian Dollar Retreat After Highs
24-Hour View: AUD rose to a high of 0.7198 last Thursday. On Friday, UOB highlighted that despite posting fresh three-month highs, upward momentum was deteriorating, with momentum indicators showing negative divergence. There was scope for AUD to rise above 0.7200, though it was unlikely to maintain a foothold above that level or reach 0.7220. Support was identified at 0.7185, with a breach of 0.7175 signalling that immediate upward pressure had eased. AUD subsequently rose briefly to 0.7208 before pulling back sharply to close at 0.7158 (-0.50%). AUD could continue to pull back toward 0.7145, though a clear break below that level appears unlikely given prevailing momentum. Resistance is at 0.7170, followed by 0.7185.
1–3 Week View: UOB had maintained a positive AUD view since the start of the month. On Friday 28 August, with spot at 0.7195, they noted that upward momentum was deteriorating amid negative divergence on momentum indicators, but that as long as AUD held above 0.7160 — the identified strong support level — there remained a chance to test 0.7220 before pullback risk increased. AUD then rose to a high of 0.7208 before pulling back sharply, breaking below 0.7160 with a low of 0.7156. The price action suggests the almost month-long AUD strength has ended. Given overbought conditions and negative divergence, AUD could pull back further toward 0.7120. Whether AUD can break clearly below that level remains uncertain. On the upside, a breach of the strong resistance level now at 0.7200 would suggest AUD is more likely to range-trade rather than continue pulling back.
