Title: AUD/USD faces a strong resistance at 0.6975 – UOB

Jul 22, 2022 06:35AM ET

By: AnalysisWatch

Here is still room for extra gains in AUD/USD, although a convincing break above 0.6975 appears unlikely, suggested FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

24-hour view: “Yesterday, we expected AUD to ‘trade sideways within a range of 0.6850/0.6920’.

However, after dipping to a low of 0.6860, AUD staged a sharp advance to 0.6940. Despite the rapid rise, upward momentum has not improved by much. That said, AUD could rise to 0.6950 first before a pullback is unlikely. The major resistance at 0.6975 is unlikely to come into the picture. Support is at 0.6905 followed by 0.6885.

Our latest narrative was from Wednesday (20 Jul, spot at 0.6905) where the strong boost in momentum is likely to lead to further AUD strength to 0.6975. While AUD rose to a high of 0.6940 yesterday, upward momentum has not improved by much. However, as long as 0.6840 (‘strong support’ level was at 0.6820 yesterday) is not breached, AUD could still advance to 0.6975. At this stage, the chance for a sustained rise above this level is not high.

Looking forward, AUD/USD traders are likely to focus on the next week’s Fed meeting, especially after the European Central Bank’s (ECB) 0.50% rate hike. That said, today’s US PMI should print firmer numbers to recall the US dollar bulls.

Forecasts suggest that the US S&P Global Manufacturing PMI is expected to decline to 52.0 from 52.7 whereas its Services counterpart could ease to 52.6 from 52.7. With this, the Composite PMI may drop to 51.7 from 52.3 prior.