AUD/USD: Momentum points to break of 0.7100 – UOB

United Overseas Bank's (UOB) Quek Ser Leang and Lee Sue Ann turn more negative on AUD/USD after a sharp sell-off toward 0.7140. They now sees a real chance of testing and breaking the major 0.7100 support, with 0.7065 as the next downside level. Any recovery is expected to be limited below 0.7170, while 0.7205 is flagged as strong resistance on a multi-day horizon.

Australian Dollar under accelerating downside pressure

"24-HOUR VIEW: While we indicated last Friday that AUD “could dip below 0.7200,” we highlighted that “based on the current momentum, the major support at 0.7175 is likely out of reach.” We did not expect the downward acceleration as AUD plunged to a low of 0.7140. AUD continued to drop in the early Asian trade today, and there is a chance for AUD to test the major support at 0.7100. On the upside, any recovery is likely to hold below 0.7170 (with minor resistance at 0.7155)."

"1-3 WEEKS VIEW: We revised our AUD view to negative last Friday (15 May, spot at 0.7215). We indicated that “the rapid build-up in downward momentum suggests AUD is likely to trade with a downside bias toward 0.7175.” We underestimated the build-up in momentum, as AUD staged a sharp sell-off that sent it to a low of 0.7140. The rapid increase in downward momentum suggests AUD is likely to break the major support at 0.7100. The next support below 0.7100 is at 0.7065. To sustain the momentum build-up, AUD must hold below 0.7205 (‘strong resistance’ level was at 0.7260 last Friday). On a short-term note, 0.7170 is already a firm resistance level"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)