A sustained break below 0.6250 is unlikely – UOB Group

The New Zealand (NZD) could continue to weaken; oversold conditions suggest a sustained break below 0.6250 is unlikely. In the longer run, downward momentum has increased slightly; pullback in NZD could potentially reach 0.6225, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD can fall to 0.6225 in the longer run

24-HOUR VIEW: “Our view of sideways trading yesterday was incorrect, as NZD fell sharply to 0.6265 before closing on a weak note at 0.6281 (-1.13%). Unsurprisingly, the sharp drop has resulted in an increase in momentum. Today, while NZD could continue to weaken, oversold conditions suggest a sustained break below 0.6250 is unlikely. The major support at 0.6225 is also unlikely to come into view. To keep the oversold momentum going, NZD must not break above 0.6325 with minor resistance at 0.6305.”

1-3 WEEKS VIEW: “We have expected a higher NZD since late last week (as annotated in the chart below). After NZD rose to 0.6379, we highlighted yesterday (01 Oct, spot at 0.6345) that “there has been no further increase in momentum, and it remains unclear if NZD could rise further to 0.6410.” We also highlighted that “only a breach of 0.6280 (‘strong support’ level) would mean that 0.6410 is not coming into view.” NZD then fell sharply, breaking below 0.6280 (low of 0.6265). Not only upward momentum has faded, but downward momentum has also increased, albeit not much. At this time, we view the current price movements as a pullback that could potentially reach the significant support at 0.6225. We will hold the same view provided that 0.6350 (‘strong resistance’ level) is not breached.”