In opinion of FX Strategists at UOB Group, further decline in AUD/USD should meet a tough contention around 0.7090 in the next weeks.

24-hour view: “We highlighted yesterday that ‘a temporary low may be in place’ and we expected AUD to ‘trade sideways between 0.7110 and 0.7180’. Our view for sideway-trading was not wrong even though AUD traded within a narrower range than expected (07122/0.7178). Momentum indicators are mostly neutral and further sideway-trading appears likely. Expected range for today, 0.7120/0.7185.”

Next 1-3 weeks: “Two days ago (24 Jan, spot at 0.7180), we highlighted that downward momentum is showing tentative signs of building and the risk of AUD breaking 0.7140 has increased. After AUD dropped sharply to 0.7091 and rebounded, we highlighted yesterday (25 Jan, spot at 0.7150) that the rapid drop appears to be overdone but the downside risk remains intact. There is no change in our view but a break of 0.7225 (no change in ‘strong resistance’ level from yesterday) would indicate that the downside risk has dissipated. Looking ahead, the next support below 0.7090 is at 0.7060.”

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