UOB’s Quek Ser Leang and Lee Sue Ann highlight a sharp AUD/USD selloff after weaker Australian Gross Domestic Product (GDP), with the pair now hovering just above 0.7120 support. While intraday momentum suggests another test of this level, oversold conditions argue against a sustained break. A clear move below 0.7120 could target 0.7095, while the broader technical picture still points to lower levels toward 0.6850/0.6870.

Oversold but still vulnerable near support

"24-HOUR VIEW: Yesterday, we expected AUD to “decline gradually to 0.7150,” but we held the view that “the 0.7135 level is unlikely to come under threat.” Our view of AUD weakness was correct, but we did not expect the sharp and rapid pace of decline, as AUD fell to a low of 0.7127. While strong momentum suggests AUD may test the support at 0.7120 today, oversold conditions suggest that a continued drop below this level is unlikely. This time around, the 0.7095 level is unlikely to come under threat. On the upside, a breach of 0.7155 (minor resistance is at 0.7145) would indicate that the decline in AUD is stabilising."

"1-3 WEEKS VIEW: We have expected AUD to trade in a range since early last week. Yesterday (03 Jun, spot at 0.7175), we highlighted that “while we continue to expect range-trading, a narrower range of 0.7120/0.7205 is likely enough to contain the price movements for now.” AUD subsequently dropped to a low of 0.7127. There has been a tentative increase in downward momentum, and if AUD breaks and holds below 0.7120, it could lead to a drop to 0.7095. The probability of AUD breaking clearly below 0.7120 will remain intact as long as 0.7185 is not breached."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)