NZD/USD: Risk for NZD shifts to the downside – UOB Group

New Zealand Dollar (NZD) is likely to continue to weaken against the US Dollar (USD); oversold conditions suggest any decline is unlikely to break below 0.5570. In the longer run, risk for NZD is beginning to shift to the downside, but it must break clearly below 0.5570, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD/USD is likely to continue to weaken

24-HOUR VIEW: “We pointed out yesterday that ‘the current price movements appear to be part of a range trading phase, expected to be between 0.5615 and 0.5665.’ Our view was incorrect, as NZD dropped to a low of 0.5591, closing on a soft note at 0.5608 (-0.49%). The increase in downward momentum suggests that NZD is likely to continue to weaken today. Given the oversold conditions, any decline is unlikely to break the support at 0.5570. Resistance is at 0.5620, followed by 0.5635.”

1-3 WEEKS VIEW: “Our update from two days ago (07 Jan, spot at 0.8640) still stands. As indicated, NZD ‘has probably entered a consolidation phase, and it is likely to trade in a 0.5590/0.5705 range for now.’ NZD tested the lower end of our expected range yesterday, reaching a low of 0.5591. There has been a tentative buildup in downward momentum, and the risk for NZD is beginning to shift to the downside. However, to decline in a sustained manner, NZD must break clearly below 0.5570. The probability of a clear break below 0.5570 will increase in the next few days, as long as 0.5660 is not breached.”