AUD/USD and a potential challenge of 0.7200 – UOB

In light of the recent price action, the Aussie Dollar could retreat and retest YTD lows in the 0.7200 neighbourhood vs. the greenback in the near term.

Key Quotes

24-hour view: “Expectation for AUD to trade sideways yesterday did not turn out as it continues to move lower and touched 0.7249. While downward momentum is not strong, there is no sign of stabilization just yet and we expect AUD to drift lower and test last week’s 0.7238 low. A dip below this level is not ruled out but a break of 0.7220 would come as a surprise. On the upside, only a break of 0.7305 would indicate that the current soft patch in AUD has stabilized (minor resistance is at 0.7290)”.

Next 1-3 weeks: “AUD dipped below the bottom of our expected 0.7250/0.7420 consolidation range yesterday (overnight low of 0.7249) before ending the day on a weak note (NY close of 0.7264, -0.62%). While the immediate pressure is on the downside and further AUD weakness is likely from here, it is unclear at this stage whether any decline is sustainable. That said, unless AUD can reclaim 0.7320 within the next couple of days, the year-to-date low of 0.7203 appears to be vulnerable. The next support at 0.7145/60 is a very major support zone, being the low in 2017 as well as the 10-year rising trend-line support (visible on the monthly charts). At this stage, a move to this major zone support would not exactly be surprising but we expect such strong levels to offer solid support”.