In view of FX Strategists at UOB Group, AUD/USD risks extra downside pressure although the 0.6820 level should emerge as a tough support in the near-term.

Key Quotes

24-hour view: “We noted the ‘soft underlying tone’ yesterday but were of the view that AUD is ‘unlikely to threaten the strong 0.6900 support level’. However, AUD cracked 0.6900 easily and plunged to a low of 0.6859 before ending the day on a weak note (closed at 0.6869, -1.02%). While the outsized decline appears to be running ahead of itself, the weakness is not showing sign of stabilizing. In other words, the risk remains on the downside even though AUD is unlikely able to maintain the pace of decline. Only a move above 0.6900 (minor resistance at 0.6880) would suggest the current weakness has stabilized. On the downside, a probe of 0.6835 would not be surprising. The next support at 0.6820 is unlikely to be challenged.”

Next 1-3 weeks: “We highlighted on Monday (06 Jan, spot at 0.6950) that the ‘risk for AUD is on the downside’. While we got the ‘direction’ of the price action right, we did not anticipate the rapid and outsized decline of -1.02% yesterday (largest 1-day drop in 8-1/2 months). While the weakness in AUD is running ahead of itself, the risk is still on the downside even though 0.6820 is a solid support and at this stage, there is no early indication that AUD could break this level. On the upside, only a move back above 0.6950 would indicate the current weakness has stabilized. Looking ahead, if AUD were to register a NY closing below 0.6820, it would indicate that the late December high of 0.7032 is a more significant top than currently expected.”