AUDUSD Sees Limited Downside Amid Oversold Conditions

United Overseas Bank (UOB) strategist Quek Ser Leang noted that the Australian Dollar (AUD) closed at 0.6951 against the US Dollar (USD) after briefly reaching 0.6976. The intraday price action is expected to remain within a narrow range of 0.6930 to 0.6975. While the AUD/USD pair has shown weakness since mid-September, oversold conditions suggest further declines may struggle to reach the next major support level at 0.6866.

Looking back at last Thursday, the AUD dropped to a low of 0.6904 before rebounding. Early in the Asian session, when the AUD was at 0.6930, UOB indicated that downward momentum had slowed and the currency was unlikely to weaken much further. The AUD then dipped to 0.6914 but later rose to 0.6976 during the New York session, closing 0.29% higher at 0.6951. Despite this brief rise, upward momentum did not increase, and UOB expects the AUD to trade sideways today.

Over a 1-3 week horizon, UOB maintains that the weakness in the AUD, which began in mid-September, remains intact. However, due to deeply oversold conditions, any further decline may fall short of the next major support at 0.6866. The strategist emphasized that only a breach of the strong resistance level at 0.6985 would indicate stabilization in the AUD's weakness. There has been no change in this view since last Friday when the spot rate was at 0.6930.