AUDUSD: Expected to Trade in a Sideways Range of 0.6660/0.6695 – UOB Group
The Australian Dollar (AUD) is currently expected to trade within a narrow sideways range of 0.6660/0.6695, according to analysts from UOB Group. While short-term fluctuations are anticipated, the long-term outlook still signals weakness for the AUD, with the key support level to watch being 0.6620. Analysts Quek Ser Leang and Lee Sue Ann of UOB Group provide insights into this forecast, noting that rejuvenated momentum could keep the AUD under pressure. Below, we examine the details of their analysis and provide an outlook for both short-term and long-term expectations.
Short-Term Outlook for AUD/USD: Sideways Trading Expected
1. Recent AUD/USD Movements
In the last few days, the AUD/USD pair has exhibited some volatility, with the Australian Dollar initially dropping sharply before experiencing a rebound. Two days ago, the AUD witnessed a significant decline, sparking concerns that the currency might be entering a phase of extended weakness. However, the AUD recovered, closing at 0.6683 with a modest gain of 0.36%, signaling a potential shift into a sideways trading phase.
UOB Group’s analysts highlighted that while the AUD had dropped sharply, they had anticipated further declines in the near term. However, the subsequent rebound suggests that the currency might be temporarily stabilizing within a narrow range. Based on this, they expect the AUD/USD to trade between 0.6660 and 0.6695 in the immediate future.
2. Sideways Trading Range of 0.6660/0.6695
According to UOB Group’s 24-hour view, the AUD appears to have entered a consolidation phase. The analysts anticipate that the currency pair will trade within a narrow sideways range of 0.6660 to 0.6695 in the near term, reflecting a lack of clear directional momentum. This suggests that while the AUD has rebounded, it is not yet showing strong signs of an upward breakout.
The sideways trading pattern indicates that traders should expect limited price movement in the short term, with resistance at the 0.6695 level and support at 0.6660. This range-bound trading is likely to persist until a significant catalyst emerges to drive the currency pair in either direction.
Long-Term Outlook: AUD Weakness Remains Intact
1. Rejuvenated Momentum Suggests Continued Weakness
Despite the short-term stabilization, UOB Group’s analysts emphasize that the broader momentum for the AUD remains weak. In their 1-3 week view, they note that the Australian Dollar has been under pressure since early October, and recent movements suggest that this weakness is still in play.
The analysts highlight that rejuvenated momentum could keep the AUD in a downward trajectory, with the key support level to monitor being 0.6620. A break below this level would likely signal a further decline in the currency, reinforcing the bearish outlook for the AUD in the medium term.
2. Resistance at 0.6705: Stabilization or Further Declines?
While the AUD has rebounded slightly, UOB Group’s analysts caution that the currency’s weakness has not necessarily reversed. They point out that the level to watch on the upside is 0.6705, which serves as a strong resistance point. If the AUD/USD pair breaks above this level, it could indicate that the recent weakness has stabilized, potentially leading to further gains.
However, as long as the AUD remains below this resistance level, the outlook for the currency remains bearish. Traders should keep an eye on both the 0.6620 support level and the 0.6705 resistance level for indications of future price movements.
Factors Impacting AUD/USD Performance
1. Australian Economic Outlook
The broader economic outlook for Australia is a key factor influencing the performance of the AUD. Economic indicators such as employment data, inflation, and GDP growth will play a critical role in shaping the currency’s trajectory. If Australia’s economic performance weakens, the AUD could face further downward pressure, especially if global economic conditions deteriorate.
In particular, the Reserve Bank of Australia’s (RBA) monetary policy decisions will be closely watched. Any indication of dovish monetary policy, such as further interest rate cuts, could weigh on the AUD and contribute to continued weakness.
2. Global Risk Sentiment
The AUD is often viewed as a risk-sensitive currency, meaning its value is closely tied to global risk sentiment. When investors are more risk-averse, the AUD tends to weaken as capital flows into safe-haven assets like the US Dollar. On the other hand, improving risk sentiment can support the AUD, as investors seek higher-yielding assets.
Recent global events, such as geopolitical tensions, trade uncertainties, and concerns over global economic growth, have impacted risk sentiment. Should these factors persist or intensify, the AUD could remain under pressure in the coming weeks.
3. US Dollar Strength
The strength of the US Dollar (USD) is another crucial factor influencing the AUD/USD pair. The USD has remained strong in recent months, supported by higher US Treasury yields and expectations that the Federal Reserve will maintain a relatively hawkish stance. As long as the USD remains strong, it will be difficult for the AUD to gain significant ground against the greenback.
Any shifts in Federal Reserve policy, such as indications of more aggressive interest rate cuts, could weaken the USD and provide some relief to the AUD. However, for now, the USD’s strength continues to be a headwind for the Australian Dollar.
Technical Analysis: Key Levels to Watch
1. Support Levels
The key support level to watch for the AUD/USD pair is 0.6620. A break below this level would signal a continuation of the recent downtrend, potentially leading to further declines in the currency. If the AUD fails to hold above this support, it could test lower levels in the coming weeks, reflecting continued weakness.
In the short term, the 0.6660 level also serves as a minor support level, within the expected sideways trading range.
2. Resistance Levels
On the upside, the key resistance level is 0.6705. A break above this level could signal that the recent weakness in the AUD has stabilized, leading to a potential recovery. However, until this resistance is breached, the bearish outlook remains intact.
In the immediate term, traders should watch the 0.6695 level as the upper boundary of the expected sideways trading range.
AUD Likely to Trade Sideways in the Near Term
The Australian Dollar is expected to trade in a narrow sideways range of 0.6660 to 0.6695 in the short term, with limited momentum driving the currency in either direction. However, the broader outlook remains bearish, with rejuvenated momentum suggesting that AUD weakness is still intact. The key support level to monitor is 0.6620, while a break above the 0.6705 resistance level would indicate a potential stabilization.
Traders should keep a close eye on economic indicators, global risk sentiment, and US Dollar strength, as these factors will play a significant role in determining the future trajectory of the AUD/USD pair. For now, the currency is likely to remain range-bound, but any significant shifts in these factors could lead to further price movements in the weeks ahead.
