AUD/USD risks extra pullbacks – UOB

FX strategists at UOB Group suggest tThe AUD could still experience extra selling pressure in the near-term.

• "24-hour view: Instead of 'edging lower to 0.6960', AUD plummeted to a low of 0.6930 last Friday. Despite the bounce from the low, the underlying remains weak and it is too early to expect a recovery. From here, AUD is more likely to consolidate and trade sideways. Expected range for today, 0.6930/0.6985.
• Next 1-3 weeks: While we detected the weakened upward momentum last Friday (03 Jan, spot at 0.6985) and cautioned that 'odds for further AUD strength have diminished', the subsequent swift and sharp sell-off that easily cracked the 'strong support' at 0.6960 came as a surprise (AUD hit a low of 0.6930). The price action suggests that last Tuesday's (31 Dec) peak of 0.7032 is a short-term top and AUD could trade below this level for the next couple of weeks. From here, the risk for AUD is on the downside but any weakness is viewed as a corrective pull-back and not the start of a major reversal. To look at it another way, AUD is likely to trade lower but for now, any weakness is viewed as part of a broad 0.6900/0.7000 range (a sustained decline below 0.6900 is not expected)."