AUD/USD: Downward bias unchanged below 0.6820 – UOB

AUD/USD risks extra losses while below the 0.6820 level in the next few weeks, suggest UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we highlighted that ‘despite AUD trading in a higher range, there is no marked improvement in momentum’ and we expected AUD to ‘trade sideways within a range of 0.6875/0.6925’. Instead of trading sideways, AUD dropped to a low of 0.6847 before closing on a weak note at 0.6856 (-0.80%). While the decline lacks momentum, there is room for AUD weaken further. However, the likelihood of a break below major support at 0.6820 is not high. Resistance is at 0.6885 but only a break of 0.6905 would indicate the current mild downward pressure has eased.”

Next 1-3 weeks: “We have held a negative AUD view since late last week. After AUD dropped to 0.6817 and rebounded, we highlighted on Monday (20 Feb, spot at 0.6880) that ‘downward momentum is beginning to wane and the chance for AUD to drop below 0.6820 in a sustained manner has decreased’. Yesterday, AUD dropped to 0.6847 and downward momentum has increased a tad. In order to keep the momentum going, AUD has to break and stay below 0.6820 within these 1-2 days or the chance of a clear drop below 0.6820 will diminish quickly. On the upside, a breach of 0.6925 (‘strong resistance’ previously at 0.6950) would indicate that AUD is not ready to head below 0.6820. Looking ahead, the next support below 0.6820 is at 0.6750.”