In the opinion of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, AUD/USD is now likely to navigate within the 0.6630-0.6780 range in the next few weeks.

Key Quotes

24-hour view: “Yesterday, we highlighted that ‘while upward momentum has not improved much, AUD could retest the 0.6820 level before a more sustained pullback is likely’. However, instead of retesting 0.6820, AUD plunged by 1.13% (0.6702), its biggest 1-day drop since early March. Not surprisingly, the outsized drop is oversold. That said, the weakness has not stabilized and barring a break above 0.6745 (minor resistance is at 0.6725), AUD could drop further to 0.6670 before stabilization is likely. The major support at 0.6635 is not expected to come under threat.”

Next 1-3 weeks: “We have held a positive AUD view since last Wednesday, 03 May (see annotations in the chart below). After AUD rose to 0.6818 and pulled back, we highlighted yesterday (11 May, spot at 0.6780) that ‘while the outlook for AUD is still positive, it remains to be seen if it has enough momentum to advance to the next objective of 0.6860’. We did not expect the sharp reversal as AUD plummeted below our ‘strong support’ level of 0.6720 in NY trade (low of 0.6689). The breach of 0.6720 indicates that AUD strength has ended. Despite the sharp drop, it is too early to expect a major reversal in AUD. For the time being, the bias is tilted to the downside but we view any AUD weakness as part of a 0.6630/0.6780 range. In other words, a sustained drop below 0.6630 is unlikely for now.”