Increasing downward momentum suggests Australian Dollar (AUD) is likely to head lower and test the 0.6555 support level. In the longer run, the odds of AUD breaking below 0.6555 are increasing, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Odds of AUD breaking below 0.6555 are increasing

24-HOUR VIEW: "When AUD was at 0.6615 yesterday, we indicated that 'the underlying tone appears to have firmed somewhat.' We were of the view that AUD 'may edge higher, but any advance is likely part of a higher range of 0.6595/0.6630.' AUD then edged to a high of 0.6624 before staging a surprisingly sharp drop that reached a low of 0.6579. The increasing downward momentum suggests AUD is likely to head lower and test the support level at 0.6555. On the upside, resistance levels are at 0.6595 and 0.6610."

1-3 WEEKS VIEW: "We have held a neutral AUD view since the start of this month. Two days ago (06 Oct, spot at 0.6595), we stated that 'we continue to hold a neutral stance on AUD, but now expect it to trade in a narrower range of 0.6555/0.6640.' Yesterday, AUD fell to a low of 0.6579, and then closed on a soft note at 0.6582 (-0.54%). Downward momentum is starting to build, and the odds of AUD breaking below 0.6555 are increasing and will continue to increase as long as the ‘strong resistance’ level, now at 0.6630, holds. Looking ahead, a clear break below 0.6555 will shift the focus to the late-September low, near 0.6520."