The Australian Dollar (AUD) faces a potential dip below the critical support level at 0.6590, according to UOB Group FX analysts Quek Ser Leang and Lee Sue Ann. However, they believe it is unlikely for AUD to maintain a position below this threshold. Should the AUD breach 0.6590, the next significant support lies at 0.6570.
Short-Term View: Potential Dip Below 0.6590
24-Hour Outlook:
“Two days ago, the AUD experienced a sharp decline. Yesterday, we noted that while the decline appeared excessive, the AUD’s weakness could extend to 0.6620 before stabilizing. We also mentioned that the major support at 0.6590 was unlikely to be threatened. Subsequently, the AUD fell further than expected to 0.6612. Despite the severe oversold conditions, as long as the minor resistance at 0.6630 and the slightly higher resistance at 0.6645 remain unbreached, the AUD could dip below the major support at 0.6590. However, given the oversold conditions, it is improbable for AUD to sustain a foothold below this level.”
Medium-Term View: Negative Outlook with Limited Downside
1-3 Weeks Outlook:
“We have maintained a negative view on the AUD since the middle of last week. Yesterday (July 23, spot at 0.6645), we highlighted that further AUD weakness is not ruled out. However, considering the approaching oversold conditions, any further decline is likely to be slower. We emphasized that the key levels to monitor are 0.6620 and 0.6590. The AUD subsequently broke below 0.6620, reaching a low of 0.6612, and closed lower for the seventh consecutive day at 0.6616, a decline of 0.41%.
“While we continue to hold a negative view, the current severely oversold conditions suggest that the AUD may not decline significantly from this point. It is important to note that if the AUD falls below 0.6590, the next major support level is at 0.6570. On the upside, a breach of the strong resistance level at 0.6675 (previously 0.6705) would indicate that the weakness in AUD has stabilized.”
Conclusion
The Australian Dollar remains under pressure with key support levels at 0.6590 and 0.6570 being closely watched. While there is potential for the AUD to dip below these supports, the oversold conditions suggest that it is unlikely to sustain such levels. On the upside, a move above 0.6675 could signal stabilization of the AUD’s recent weakness.
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