AUD/USD could extend the drop to 0.7035 – UOB

The bearish stance remains unchanged on the pair and it could drop to the 0.7035 area, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Instead of trading sideways (as expected last Friday), AUD cracked the major 0.7145 support and plummeted to a low of 0.7099. The sharp and impulsive drop appears incomplete but in view of the oversold conditions, any further decline could be limited to 0.7065 (next support is at 0.7035). On the upside, we expect 0.7160 to be strong enough to cap any intraday bounce (minor resistance is at 0.7135)”.

Next 1-3 weeks: “We have been bearish AUD since early this month (see update on 03 Sep, spot at 0.7185) but indicated that we are mindful of the long term 0.7145/60 support zone. AUD held above this support zone for several days and we warned last Thursday (06 Sep, spot at 0.7195) that “AUD has to break the major support soon”. The support zone finally cracked last Friday as AUD plunged to a low of 0.7099. From here, the outlook is still clearly bearish and we anticipate further AUD weakness to 0.7035, with decent odds for further extension to 0.7000. That said, in view of the oversold conditions, AUD may not be able to maintain the current pace of decline. On the upside, the ‘stop-loss’ level is adjusted to 0.7195 from 0.7260. On a shorter-term note, 0.7160 is already a strong resistance”.