In the view of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, a deeper drop could see AUD/USD revisit the mid-0.6400s in the short term.

Key Quotes

24-hour view: “When AUD was trading at 0.6540 in early Asian trade yesterday, we highlighted that ‘as long as AUD stays below 0.6580 (minor resistance is at 0.6560), the oversold weakness could extend to 0.6515, possibly testing the major support at 0.6500’. Our view was correct even though AUD edged a couple of pips below 0.6500 (low of 0.6498). Today, further AUD weakness is not ruled out but in view of the severely oversold conditions, AUD is unlikely to threaten 0.6450 (minor support is at 0.6475). Resistance is at 0.6525, followed by 0.6545.”

Next 1-3 weeks: “After AUD fell sharply to 0.6530 on Wednesday, we highlighted yesterday (25 May, spot at 0.6540) that ‘the boost in momentum suggests AUD could weaken further to 0.6500’ We added, ‘At this stage, it is premature to expect a break of 0.6450’. While our view for AUD to weaken was correct, we did not quite expect 0.6500 to come into view so quickly (AUD dropped to 0.6498 in NY trade). The weakness in AUD that started two weeks ago has yet to stabilize. In other words, AUD could weaken further to 0.6450. On the upside, a breach of 0.6590 (‘strong resistance’ level was at 0.6615 yesterday) would suggest the weakness in AUD has stabilized.”