Analysts at UOB in Singapore want to see technical confirmation of the AUD/USD’s uptrend triggered before chasing the currency higher.
The Aussie dollar was a victim of news that OPEC countries failed to agree a deal on an output freeze in Doha (Saudi Arabia reportedly did not want to participate in an agreement where Iran would be absent).
The failure sent oil prices and Asian stock market lower overnight and dragged commodity-orientated currencies such as AUD lower.
The pound sterling spiked notably higher in early Asian trade as a result and was seen back at 1.86.
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However, subsequent trade has been lower as the Aussie continues its steady recovery alongside oil prices with markets determining that the sell-off may have been an overreaction.
Against the US dollar we see a similar recovery as buyers rush into the market to buy at a discount what has been one of the best performing currencies of 2016.
The pair has risen from below 0.69 in January to register 0.7727 in April, at the time of writing the conversion is at 0.7716.
Despite the strong recovery it could be too soon to chase AUD/USD higher argues Lee Sue Ann at United Overseas Bank(UOB) in Singapore.
The analyst has been arguing for days now that despite the clearly improved upward momentum in the AUD to USD exchange rate traders should wait for a clear break above the major 0.7750 resistance before turning bullish.
“The sharp drop upon opening today does not bode well for AUD and the odds for an upside break has diminished considerably,” says Ann.
From here, AUD has to move clearly above the key 0.7765 resistance (UOB have moved the bar higher from 0.7750) before a further up-move can be expected,” says Ann.
On the downside, strong support is noted at 0.7585 but a clear break below this rather crucial level could lead to a rapid sell-off towards the early April low of 0.7490.