AUD/USD: Strong support emerges at 0.7110 – UOB

Further retracement in AUD/USD is predicted to face an important support at 0.7110, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we expected AUD to weaken yesterday, we were of the view that ‘a break of 0.7185 is unlikely’. In other words, we did not expect the sharp drop to 0.7146. While deeply oversold, the weakness has scope to extend to 0.7135 before stabilizing. On the upside, a breach of 0.7205 (minor resistance is at 0.7185) would indicate that the weakness has stabilized.”

Next 1-3 weeks: “Yesterday (06 Jan, spot at 0.7220), we indicated that the outlook for AUD is mixed and we expected it trade between 0.7165 and 0.7290. We did not anticipate the sharp drop to 0.7146 during NY hours. The rapid drop appears to be running ahead of itself but as downward momentum has improved, the risk is tilted to the downside. That said, any weakness is expected to encounter solid support at 0.7110. On the upside, a break of 0.7235 would indicate that the downside risk has dissipated.”