UOB’s Quek Ser Leang and Lee Sue Ann highlight the edged AUD/USD sell-off following weaker Australian gross domestic product (GDP), with the pair currently hovering just above the 0.7120 support. While intraday momentum suggests another test of this level, oversold conditions argue against a sustained breakout. A clear move below 0.7120 could head towards 0.7095, while the broader technical picture continues to point towards lower levels towards 0.6850/0.6870.

Oversold but still vulnerable near support

“24-HOUR VIEW: Yesterday we expected the AUD to “gradually decline to 0.7150” but maintained that “the 0.7135 level is unlikely to be at risk.” Our view of AUD weakness was correct, but we did not expect the edged and rapid rate of decline as AUD fell to a low at 0.7127. While powerful momentum suggests AUD may test the support at 0.7120 today, oversold conditions suggest a further decline below this level is unlikely. This time, the 0.7095 level is unlikely to be at risk. On the other hand, a break of the 0.7155 level (slight resistance at 0.7145) would indicate a stabilization of the AUD decline.

“1-3 WEEK VIEW: We expected AUD to trade in a range since the start of last week. Yesterday (June 3, spot at 0.7175) we highlighted that “while we continue to expect range-based trading, the narrower range of 0.7120/0.7205 is likely to be enough to contain price movement for now.” AUD then fell to a low of 0.7127. There has been an initial augment in downside momentum and if AUD breaks and stays below 0.7120, it could lead to a decline to 0.7095. The probability of AUD breaking clearly below 0.7120 will remain unchanged unless 0.7185 is breached.”

(This article was created with the support of an artificial intelligence tool and has been reviewed by an editor.)