NZD/USD risks further downside – UOB

NZD/USD could grind lower to the 0.6540 region in the near-term, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we held the view that NZD ‘could drop further from here but any weakness is viewed as part of a 0.6560/0.6620 range’. However, NZD traded in a quiet manner between 0.6572 and 0.6602 before closing largely unchanged at 0.6582 (-0.03%). The underlying tone still appears soft and we continue to see chance for NZD to drift lower to 0.6560. For today, a sustained decline below this level is unlikely (next support is at 0.6540). Resistance is at 0.6600 but the stronger level is at 0.6615.”

Next 1-3 weeks: “We highlighted yesterday that ‘upward momentum is lackluster and the odds for a sustained advance above 0.6690 are not high’ and we expected NZD to ‘trade at a higher range of 0.6580/0.6710’. The sudden and sharp sell-off during NY hours was unexpected as NZD plunged to a low of 0.6583. While the rapid drop appears to be running ahead of itself, downward momentum has improved and NZD could test the major support at 0.6540. A retest of last month’s low of 0.6512 is not ruled out but for now, the prospect for such a move is not that high. Overall, NZD is expected to stay under pressure unless it can move above 0.6645 (‘strong resistance’ level).”