AUD/USD could extend the decline to the 0.6680 region in the short-term horizon, note Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “We highlighted last Friday that ‘despite the lackluster downward momentum, we continue to see room for AUD to test 0.6775 before a more sustained rebound is likely”. While our view for AUD to weaken was correct, instead of testing 0.6775, AUD plummeted to a low of 0.6719 before closing on a weak note at 0.6726 (-1.20%). Further AUD weakness is not ruled out but in view of the deeply oversold conditions, any decline today is unlikely to threaten the major support at 0.6680. On the upside, a breach of 0.6785 (minor resistance is at 0.6760) would indicate that the weakness in AUD has stabilized.”

Next 1-3 weeks: “Our most recent narrative was from last Thursday (23 Feb, spot at 0.6810), where we indicated that AUD ‘is likely to weaken further to 0.6775, possibly 0.6730’. Our view turned out to be correct as AUD plummeted to a low of 0.6719 on Friday. The outlook in AUD remains weak and the next levels to watch are at 0.6680 and 0.6630. All in all, only a breach of 0.6820 (‘strong resistance’ level previously at 0.6890) would indicate that the AUD weakness that started more than a week ago has come to an end.”