AUD/USD: A test of 0.7100 emerges on the horizon – UOB

In opinion of FX Strategists at UOB Group, further selling pressure could drag AUD/USD to another visit to the 0.7100 area in the short-term horizon.

Key Quotes

24-hour view: “We highlighted yesterday that ‘downward momentum has improved, and we continue to expect a weaker AUD’. We added, ‘a break of 0.7200 is not ruled out but in view of the still oversold conditions, a sustained decline below 0.7200 is unlikely’. We did not anticipate the manner by which AUD cracked 0.7200 and accelerated downwards to 0.7143. Conditions remain oversold and while further AUD weakness is not ruled out, a clear break of the major support at 0.7100 appears unlikely (minor support is at 0.7125). Resistance is at 0.7180 followed by 0.7205.”

Next 1-3 weeks: “On Wednesday (18 Aug, spot at 0.7255), we highlighted that ‘strong downward momentum suggests that AUD could weaken further to 0.7200’. We added, ‘the next support is at 0.7150’. While our view was correct, we did not quite expect AUD to reach 0.7150 so soon (low of 0.7143 yesterday). While shorter-term conditions are oversold, the still strong downward momentum suggests AUD could weaken further to 0.7100. Looking ahead, the next support below 0.7100 is at 0.7060. Overall, AUD is expected to stay weak unless it can move above the ‘strong resistance’ level at 0.7240 (level was at 0.7300 yesterday).”