Rapid increase in downward momentum is likely to lead to further losses, but Australian Dollar (AUD) may not reach 0.6420. In the longer run, risk for AUD is tilted to the downside toward 0.6420, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Increase in downward momentum is likely to lead to further losses

24-HOUR VIEW: "We stated yesterday that 'the bias for AUD is tilted to the downside toward 0.6475.' However, we pointed out that 'the major support at 0.6455 is unlikely to come into view.' Our view for a weaker AUD was not wrong, even though it fell more than expected, reaching a low of 0.6450. While the rapid increase in downward momentum is likely to lead to further losses, oversold conditions suggest any decline may not reach the month-to-date low, near 0.6420. Note that there is another level at 0.6435. To sustain the momentum, AUD must hold below 0.6485, with minor resistance at 0.6470."

1-3 WEEKS VIEW: "In our most recent narrative from last Friday (15 Aug, spot at 0.6510), we highlighted that AUD 'is still trading in a range, probably between 0.6455 and 0.6555.' Yesterday, AUD dropped below 0.6455 and reached a low of 0.6450. Downward momentum is increasing, and the risk for AUD is tilted to the downside toward 0.6420. Looking ahead, AUD must break and hold below this level before further sustained decline can be expected. We will maintain our view provided that the ‘strong resistance’ level at 0.6505 is not breached."