AUD/USD: Downside risks are building up – UOB

AUD/USD needs to breach the 0.7445 level to allow for the continuation of the downtrend, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we expected AUD to strengthen yesterday, we were of the view that ‘any advance is unlikely to break the major resistance at 0.7570’. The subsequent AUD strength exceeded our expectation as it rose to 0.7599 before staging a surprisingly swift and sharp selloff to an overnight low of 0.7481. The rapid decline appears to be overdone but AUD could test 0.7465 first the current weakness should stabilize. Resistance is at 0.7525 followed by 0.7545.”

Next 1-3 weeks: “On Monday (05 Jul, spot at 0.7515), we indicated that the recent downward pressure in AUD has eased and we expected AUD to ‘trade within a 0.7470/0.7570 range’. We did not anticipate the sharp rise in volatility as AUD rose to 0.7599 yesterday before plunging to 0.7481. The risk is shifting to the downside but AUD has to break the major support at 0.7445 before a sustained decline can be expected. The prospect for AUD to break 0.7445 appears to be quite high as long as it does not move above 0.7570 (‘strong resistance’ level) within these few days.”