Next level to monitor is 0.6520 – UOB Group

Oversold conditions and slowing momentum suggest Australian Dollar (AUD) is likely to trade in a range of 0.6545/0.6585. In the longer run, the potential for further sustained decline may be limited; the next level to monitor is 0.6520, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

AUD can test the 0.6585 resistance

24-HOUR VIEW: “After AUD fell sharply on Monday, we highlighted yesterday (Tuesday) that ‘While oversold, the decline could extend to 0.6560 before stabilisation can be expected.’ Our view of AUD declining was not wrong, even though it fell more than expected to 0.6545. Conditions remain oversold, this, combined with tentative signs of slowing momentum, suggests that instead of continuing to weaken, AUD is more likely to trade in a 0.6545/0.6585 range.”

1-3 WEEKS VIEW: “Yesterday (29 Oct, spot at 0.6585) we indicated that ‘there is potential for AUD to continue to decline to 0.6560, possibly 0.6520.’ We did not quite expect AUD to reach 0.6560 as quickly, as it dropped to a low of 0.6545 during NY trading. Although the weakness has not stabilised, given that the current decline is entering its second month, the potential for further sustained weakness may be limited. The next level to monitor is 0.6520. On the upside, a breach of 0.6620 (‘strong resistance’ was at 0.6640 yesterday) would mean that the weakness has stabilised.”