NZD/USD: Likely to test 0.5940 in short-term

As long as 0.6005 is not breached, the New Zealand Dollar (NZD) could decline further. Impulsive momentum suggests further NZD weakness, but conditions are severely oversold, and it remains to be seen if it can break below 0.5940, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann notes.

A break below 0.5940 is possible

24-HOUR VIEW: “We expected NZD to trade sideways yesterday. Our view was incorrect. Instead of trading sideways, NZD plummeted and closed lower by 0.49% (0.5980). The sharp and swift drop appears to be overdone, but as long as 0.6005 (minor resistance is at 0.5995) is not breached, NZD could decline further. However, any decline is unlikely to reach 0.5940 (there is another support level at 0.5960).”

1-3 WEEKS VIEW: “Last Wednesday (17 Jul), when NZD was trading at 0.6070, we highlighted that ‘downward momentum is building, but not sufficiently enough to suggest the start of a sustained decline.’ After NZD fell sharply on Friday, we indicated yesterday (22 Jul, spot at 0.6025) that ‘as long as 0.6070 (‘strong resistance’ level) is not breached, there is room for NZD to drop to and possibly below 0.6005.’ We added, ‘Looking ahead, the next support below 0.6005 is at 0.5980.’ While our view of NZD declining was correct, we did not quite anticipate the manner in which it plunged to 0.5972 in NY trading. While the impulsive downward momentum suggests further NZD weakness, conditions are severely oversold, and it remains to be seen if NZD can break the next support at 0.5940. On the upside, the ‘strong resistance’ level has moved lower to 0.6030 from 0.6070.”

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