The Australian Dollar (AUD) could drop further to 0.6705. Upward momentum has faded; downward momentum has increased slightly. AUD is likely to trade with a downward bias but is unlikely to break 0.6680, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

AUD to test 0.6680 below 0.6705

24-HOUR VIEW: “While we noted yesterday that the underlying tone has softened, we held the view that AUD ‘is likely to trade in a lower range of 0.6740/0.6785.’ Instead of trading in a range, AUD fell sharply, reaching a low of 0.6715. AUD closed on a weak note at 0.6734 (-0.38%). The sharp and swift drop appears to be overdone, but with no sign of stabilisation just yet, AUD could drop further to 0.6705. The major support at 0.6680 is unlikely to come under threat. Resistance levels are at 0.6745 and 0.6760.”

1-3 WEEKS VIEW: “We turned positive in AUD since the start of the month. In our most recent narrative from last Friday (12 Jul, spot at 0.6765), we indicated that ‘while there is room for AUD to continue to rise, it has to surpass 0.6800 before further advance can be expected.’ We added, ‘given the overbought conditions, it remains to be seen if AUD can break above 0.6800.’ Yesterday, AUD fell sharply and broke below our ‘strong support’ level of 0.6735. Not only has upward momentum faded, but downward momentum has also increased slightly. From here, we expect AUD to trade with a downward bias, but at this time, it does not appear to have enough momentum to break the major support at 0.6680. On the upside, a breach of 0.6775 would indicate that the current modest downward momentum has eased.”