Australian Dollar: Consolidation continues below resistance against US Dollar - UOB

UOB analysts Quek Ser Leang and Lee Sue Ann note that AUD/USD is consolidating around 0.7120 after a brief surge to 0.7140. This price action is considered part of a range between 0.7105 and 0.7135. The analysts maintain a negative 1-3 week outlook for AUD, provided resistance at 0.7140 materializes, though they admit that the probability of a drop to 0.7050 has significantly decreased.

Yesterday, AUD briefly touched 0.7140 before closing 0.11% lower at 0.7119, with no corresponding increase in upward momentum; thus, movements are likely within the identified trading range. Their most recent assessment, from Thursday (17 Sep) when the spot rate was 0.7090, had forecast a potential drop to 0.7050, contingent on AUD staying below 0.7140, their "strong resistance" level.

While this level has not been breached, the probability of AUD reaching 0.7050 has notably diminished. AUD experienced a brief rally above 0.7100 in the Asian session on Tuesday due to hawkish remarks from the Reserve Bank of Australia (RBA) and increased optimism. However, ongoing Middle East tensions and the Federal Reserve's hawkish stance continue to bolster the US Dollar's bullish narrative, potentially curbing AUD's gains.

The upcoming Trump-Xi summit is also a focal point. Meanwhile, USD/JPY shows modest gains, trading near 157.50 in the Asian session, as intervention fears help cushion the Japanese Yen's decline. The Bank of Japan's dovish policy shift to a 31-year high interest rate adds pressure on the Yen, keeping bulls cautious. Overall, the US Dollar maintains a bullish outlook, driven by the Federal Reserve's hawkish stance and Middle East tensions, creating a favorable environment for AUD/USD.

Gold experiences a second consecutive day of decline, slipping to $4,315, or a three-day low, amid institutional demand support. Bitcoin experiences a pullback, falling below $85,500 following a 6.7% surge the previous day.