Weakness in Australian Dollar (AUD) could extend to 0.6620 before stabilisation can be expected; major support at 0.6590 is unlikely to come under threat. Further AUD weakness is not ruled out, albeit likely at a slower pace. The levels to watch are 0.6420 and 0.6390, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann notes.

A break below 0.6620 to bring 0.6590 into view

24-HOUR VIEW: “The sharp drop in AUD that sent it to a low of 0.6632 was surprising. While the decline appears to be overdone, the weakness in AUD could extend to 0.6620 before stabilisation can be expected. The major support at 0.6590 is unlikely to come under threat. Resistance is at 0.6660; a breach of 0.6675 would mean the weakness has stabilised.”

1-3 WEEKS VIEW: “Last Wednesday (17 Jul), when AUD was trading 0.6730, we indicated that AUD ‘is likely to trade with a downward bias but is unlikely to break below 0.6680.’ On Friday (19 Jul, spot at 0.6700), we indicated that ‘while there is scope for AUD to drop below 0.6680, it is too early to determine if there is enough momentum for it to reach 0.6640.’ Yesterday, AUD plummeted and broke clearly below both 0.6680 and 0.6640, reaching a low of 0.6632. Further AUD weakness is not ruled out, but given that conditions are approaching oversold levels, the pace of any further decline is likely to be slower. The levels to watch are 0.6620 and 0.6590. On the upside, a breach of 0.6705 (‘strong resistance’ level previously at 0.6755) would indicate that AUD is not declining further.”