NZD/USD: Set to test 0.5920 in short term

The New Zealand (NZD) is likely to trade in a range between 0.5870 and 0.5920. Further NZD weakness is not ruled out; severely oversold conditions suggest limited downside potential. The level to monitor is 0.5850, UOB Group FX analysts Quek Ser Leang and Peter Chia note.

The level to monitor is 0.5850

24-HOUR VIEW: “When NZD was trading at 0.5920 yesterday, we stated that ‘as long as 0.5950 is not breached, it could test the 0.5900 level the risk of a rebound increases.’ NZD did not breach 0.5950 (high has been 0.5930), but it broke clearly below 0.5900, reaching a low of 0.5878. While there is no sign of recovery, severely oversold conditions and tentative signs of slowing momentum indicate that NZD is unlikely to weaken much further. Today, NZD is more likely to trade in a range, probably between 0.5870 and 0.5920.”

1-3 WEEKS VIEW: “We have held a negative NZD view since the middle of last week (see annotations in the chart below). In our most recent narrative from two days ago (24 Jul, spot at 0.5950), we highlighted that ‘downward momentum remains strong, and the next level to watch is 0.5900.’ Yesterday, NZD broke below 0.5900 and dropped to a low of 0.5873. While further NZD weakness is not ruled out, severely oversold conditions suggest limited downside potential. The next level to monitor is 0.5850. On the upside, a breach of 0.5955 (‘strong resistance’ level previously at 0.5980) would suggest that NZD is not weakening further.”

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