AUD/USD could extend the correction lower to the mid-0.6700s, according to FX Strategists at UOB Group.
Key Quotes
24-hour view: “While we held the view that AUD could weaken yesterday, the rapid pace of decline that sent it tumbling to a low of 0.6780 was not exactly expected. The decline is running too fast, too soon and further sustained weakness is not expected for today. AUD is more likely to consolidate its loss and trade sideways at these lower levels, expected to be between 0.6780 and 0.6820″.
Next 1-3 weeks: “While we indicated yesterday (19 Sep, spot at 0.6820) that a “short-term top is in place”, we expected AUD to trade sideways to ‘slightly lower’. However, AUD closed sharply lower for the second straight day (AUD lost -0.56% on top of -0.54% on Wed, for a two-day loss of – 1.10%, the largest two-day decline since late April). In other words, the ‘solid support’ at 0.6755 that we highlighted yesterday may not hold. To look at it another way, from here we expect AUD to trade with a downward bias towards 0.6755. If there is a clear break 0.6755, the risk of a test of 0.6700 would increase considerably. On the upside, only a move above 0.6850 would indicate the current downward pressure has eased”.
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