United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann flag a sudden AUD/USD selloff to 0.7156, with intraday momentum pointing to further losses toward 0.7140, though 0.7120 is seen as strong support for now. Over the next one to three weeks, the bank now expects the pair could decline toward 0.7120 unless it rebounds above 0.7210.

Selloff shifts focus to lower supports

“24-HOUR VIEW: AUD traded between 0.7210 and 0.7238 two days ago and closed largely unchanged at 0.7217 (+0.01%). When it was at 0.7220 in the early Asian session yesterday, we highlighted that “momentum indicators are mostly flat,” and we expected AUD “to trade in a range between 0.7200 and 0.7235.” The subsequent price action did not unfold as expected. Instead of trading in a range, AUD staged a sudden and sharp selloff that reached a low of 0.7156. The rapid increase in momentum suggests further AUD downside toward 0.7140. Given the oversold conditions, AUD is unlikely to reach the major support at 0.7120. To keep the momentum going, AUD must hold below 0.7190, with minor resistance at 0.7175.”

“1-3 WEEKS VIEW: We have held the same view since last Friday (04 Sep, spot at 0.7205), when we indicated that AUD “could edge higher, but any advance is likely to stay within a 0.7160/0.7240 range.” After edging higher for several days and reaching a high of 0.7238 two days ago, AUD plunged and closed 0.83% lower at 0.7157 yesterday. The rapid increase in downward momentum indicates that AUD could decline toward 0.7120. However, if AUD were to break above 0.7210 (‘strong resistance’ level), it would mean that it is likely to continue to trade in a range.”