AUD/USD has staged an initial bounce after probing multi-month descending line near 0.6360. 0.6525 is first hurdle, analysts at Société Générale report.
Failure to reclaim 0.6525 can trigger new selling
AUD/USD has recently formed an interim support at 0.6360 as it touched the line connecting lows of March and May. An initial bounce is taking shape however signals of a large upside are not yet visible.
Recent pivot high at 0.6525 is expected to be first layer of resistance near term.
Holding below 0.6525, there would be risk of one more down leg. Next potential support is located at projections and October 2022 low of 0.6200/0.6170.
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The AUD/USD pair has been stuttering this week as trading patterns shift and investors seem less likely to buy the Australian dollar.
Despite recent gains, Societe Generale FX strategist Vincent Juvyns says that the pair remains at risk of a further pullback if it continues to linger below 0.6525.
The pair has been under pressure this week, with the US dollar proving better supported by a rise in US bond yields, while Australia’s low-yielding currency has struggled to make ground.
The positive news from China on its economy and vaccination drive has done nothing to stop the selling and Juvyns says that the pair could still push lower if it fails to break through the 0.6525.
“The AUD/USD pair has been battling to break out over the 0.6525 key level of resistance so far this week. Yesterday’s rally back above 0.6500 ran out of steam just shy of the 0.6525 key barrier,” Juvyns said.
Analysts say that RBA’s decision to keep rates unchanged and its ‘data-dependent’ policy stance has kept the Australian dollar off balance this week, with no clear direction.
If the pair fails to break through the 0.6525-level, Juvyns says that we could see another leg down.
“We continue to view the current key area between 0.6425 and 0.6525 as a make-or-break trigger in the pair this week, hence only a break above the 0.6525 barrier on a closing basis would open up the gateway for a deeper move towards 0.6590/0.6660 and beyond,” Juvyns added.
The AUD/USD pair could continue to test its mettle over the coming days, with more gains certainly possible, but the risk of a further slide in the pair has been highlighted by Societe Generale FX strategist Vincent Juvyns.