Strong momentum is likely to lead to further weakness; oversold conditions suggest Australian Dollar (AUD) may not reach 0.6405 against US Dollar (USD), UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Strong momentum is likely to lead to further weakness

24-HOUR VIEW: "Our view of range-trading yesterday was incorrect, as AUD dropped sharply to a low of 0.6427. Strong momentum is likely to lead to further weakness, but the oversold conditions suggest any decline may not reach 0.6405 (with minor support at 0.6420). Resistance levels are 0.6465 and 0.6485."

1-3 WEEKS VIEW: "Momentum continues to build; AUD could potentially break below 0.6405 and test June’s low, near 0.6375. We highlighted two days ago (29 Jul, spot at 0.6525) that the recent 'buildup in upward momentum had dissipated, and there are early signs of building downward momentum.' We were of the view that AUD 'is likely to edge lower, potentially reaching 0.6480.' Rather than edging lower, AUD plunged below 0.6480 yesterday, reaching a low of 0.6427. Momentum continues to build, and AUD could potentially break below 0.6405 and test June’s low, near 0.6375. To maintain the momentum buildup, AUD must hold below 0.6520 (‘strong resistance’ level was at 0.6570 yesterday)."