AUD/USD: Door open to a test of 0.7200 – UOB

In opinion of FX Strategists at UOB Group, AUD/USD remains poised to drop further with the next target at the 0.7200 yardstick.

Key Quotes

24-hour view: “While we expected AUD to weaken yesterday, we were of the view that ‘a clear break of the major support at 0.7310 is unlikely’. However, AUD not only cracked 0.7310, it also took out a key support at 0.7290 as it plunged to an overnight low of 0.7243. Further AUD weakness is not ruled but deeply oversold conditions suggest that the next support at 0.7200 could be out of reach for today (minor support is at 0.7225). On the upside, a break of 0.7295 would indicate that the current weakness has stabilized (minor resistance is at 0.7275).”

Next 1-3 weeks: “We have expected AUD to trade within a 0.7310/0.7420 range since last Thursday (12 Aug, spot at 0.7370). On Monday, we indicated that ‘looking ahead, the current consolidation is likely to be resolved by an attempt to move lower but AUD has to close below July’s low of 0.7290 before a sustained decline can be expected’. That said, we did not expect the outsized drop of -1.10% (0.7256) yesterday. While the sharp drop appears to be running ahead of itself, strong downward momentum suggests that AUD could weaken further to 0.7200. The next support is at 0.7150. Overall, AUD is expected to stay weak unless it can move above the ‘strong resistance’ level (currently at 0.7330).”