New Zealand Dollar (NZD) could decline further but may not be able to break clearly below the major support at 0.5770. In the longer run, NZD may decline below 0.5770, but it remains to be seen if it can maintain a foothold below this level, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
NZD may decline below 0.5770
24-HOUR VIEW: “Following NZD’s sharp rise to 0.5888 on Monday, we pointed out yesterday (Tuesday) that ‘the rapid rise appears to be overdone, and instead of continuing to rise, NZD is more likely to trade between 0.5825 and 0.5890.’ Instead of trading in a range, NZD plummeted to 0.5792, closing on a weak note at 0.5801 (-1.10%). The strong downward momentum signals further declines, but deeply oversold conditions suggest NZD may not be able to break clearly below the major support at 0.5770. To sustain the oversold momentum, NZD must remain below 0.5835 (minor resistance is at 0.5820).”
1-3 WEEKS VIEW: “On Monday (09 Dec), when NZD was at 0.5860, we indicated that it ‘is likely to trade with a downward bias, but the likelihood of it reaching 0.5770 is not high for now.’ After NZD rebounded strongly, we indicated yesterday (10 Dec, spot at 0.5860) that ‘although our strong resistance’ at 0.5890 has not been breached yet, the slowing momentum suggests the likelihood of NZD declining to 0.5770 has diminished.’ We did not expect NZD to then drop to 0.5792. While the price action suggests NZD may decline below 0.5770 this time around, it remains to be seen if it can maintain a foothold below this level. On the upside, the ‘strong resistance’ level has moved lower to 0.5865 from 0.5890. Looking ahead, the next level to monitor below 0.5770 is 0.5740.”
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