24-hour view: We expected AUD to consolidate yesterday. Instead of consolidating, AUD nosedived to a low of 0.6358 before closing lower by a whopping 1.34% (0.6379). The outsized selloff appears to be overextended, but there is a chance for AUD to test 0.6340 first before levelling off. The major support at 0.6300 is unlikely to come under threat. On the upside, if AUD breaks above 0.6420 (minor resistance is at 0.6400), it would mean the weakness in AUD has stabilised.

Next 1-3 weeks: On Monday (04 Sep, spot at 0.6450), we highlighted that AUD “is likely to trade in a range of 0.6390/0.6525 for the time being.” We did not anticipate the sharp selloff yesterday, as AUD plunged to a low of 0.6358. Further AUD weakness appears likely, but severely oversold conditions suggest a slow pace of decline. At this stage, the likelihood of AUD breaking clearly below 0.6300 is not high. Overall, only a breach of the ‘strong resistance’ level (now at 0.6450) would indicate that AUD is not weakening further.