AUD/USD could test sub-0.7400 levels – UOB

In view of FX Strategists at UOB Group, a test of levels below 0.7400 in the pair has not been ruled out in the near term.

Key Quotes

24-hour view: “AUD hit a fresh low of 0.7413 before rebounding strongly to close slightly higher for the day. While the 0.7413 low is likely a temporary bottom, it is too early to expect a significant rebound. AUD is more likely to consolidate its loss and trade sideways at these lower levels, likely within a 0.7430/0.7490 range”.

Next 1-3 weeks: “In the latest update on Tuesday (08 May, spot at 0.7515), we left off with the view that the risk of a short-term low has increased and added that we “prefer to wait for a break of 0.7570 before shifting from a bearish to neutral stance”. Despite our reservation, AUD subsequently dropped sharply and hit a low of 0.7413 yesterday. The sharp bounce from the low seems to indicate that AUD is searching for a short-term low but confirmation is only upon a break above the ‘stop-loss’ level at 0.7550 (level previously at 0.7570). Until then, another attempt to move below 0.7400 is not ruled out but we are not apportioning high odds for such a scenario. The next support below 0.7400 is at 0.7370”.