AUD/USD: Further decline appears likely below 0.6680 – UOB

24-hour view: We highlighted yesterday that “the outlook for AUD is mixed”, and we expected it to trade in a range of 0.6725/0.6795. However, AUD traded in a volatile manner between 0.6699 and 0.6821 before ending the day on a weak note at 0.6709 (-0.75%). While oversold, the weakness in AUD could test the major support at 0.6680. Today, a sustained drop below this level is unlikely. On the upside, if AUD breaks above 0.6750 (minor resistance is at 0.6730), it would mean that the weakness in AUD has stabilised. 

Next 1-3 weeks: Our latest narrative was from two days (26 Jul, spot at 0.6765) when we highlighted that “downward momentum is fading and the chance of AUD breaking below 0.6700 has decreased.” Yesterday, AUD spiked above our ‘strong resistance’ level of 0.6800 (high of 0.6821) and then plunged to test 0.6700 (low of 0.6699). While downward momentum is building again, AUD has to break and stay below the major support at 0.6680 before further weakness is likely. The chance of AUD breaking clearly below 0.6680 appears to be high. Looking ahead, the next level to watch below 0.6680 is 0.6640. In order not to lose momentum, AUD must stay below 0.6785.