Despite the sharp pullback appears overdone, AUD/USD could still attempt a move to the 0.7050 zone in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we expected AUD to decline yesterday, we were of the view that ‘the 0.7175 support is unlikely to come under challenge’. However, AUD plunged to 0.7095 before snapping back up. Oversold conditions suggest that the NY low of 0.7095 is likely to hold and AUD could consolidate within a range of 0.7120/0.7200.”

Next 1-3 weeks: “Yesterday (24 Feb, spot at 0.7220), we highlighted that ‘the risk of a short-term top has increased’. We added, ‘a break of 0.7175 would indicate that the week-long upward pressure has dissipated’. While our view for a short-term top was not wrong, we did not anticipate the price actions where AUD plummeted to 0.7095 and the subsequent sharp rebound. The rapid drop appears to be overdone but there is chance for AUD to test the major support at 0.7050 before a more sustained recovery can be expected. On the upside, a break of 0.7230 (‘strong resistance’ level) would indicate that 0.7050 is not coming into the picture.”