In opinion of FX Strategists at UOB Group, AUD/USD risks further downside in the near-term although a breach of the 0.7005 levels looks out of favour for the time being.
Key Quotes
24-hour view: “We expected AUD to weaken yesterday but held the view that ‘any weakness in AUD is unlikely to challenge last month’s low near 0.7005’. We highlighted that ‘0.7025 is already quite a strong level’. Our view was not wrong as AUD dropped to a low of 0.7021 before rebounding. While downward pressure has eased somewhat, it is too soon to expect a sustained recovery. For today, AUD is likely to consolidate and trade between 0.7030 and 0.7095.”
Next 1-3 weeks: “We have held the same view since last Friday (16 Oct, spot at 0.7080) wherein AUD ‘could weaken further but odds for break of last month’s low near 0.7005 are not high’. AUD dropped to a low of 0.7021 yesterday (20 Oct) before recovering. Downward momentum has improved, albeit not by much. While we continue to see 0.7005 as a solid support, we are not ruling out a break of this level. That said, it is left to be seen if AUD can maintain a foothold below this level. Overall, the current downward pressure is deemed as intact as long as AUD does not move above 0.7130 (‘strong resistance’ level was previously at 0.7145). Looking forward, the next support below 0.7005 is at 0.6980.”
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