In light of the recent price action, a breakdown of 0.5565 in NZD/USD appears out of favour for the time being, suggest FX Strategists at UOB Group Quek Ser Leang and Peter Chia.
24-hour view: “Yesterday, we held the view that NZD ‘could dip to 0.5600 first before the risk of a rebound would increase’. NZD dropped more than we expected but it rebounded strongly from the next support at 0.5565 (high has been 0.5733). The sharp and swift rebound appears to be running ahead of itself and NZD is unlikely to advance much further. For today, we expect NZD to trade within a range of 0.5630/0.5740.”
Next 1-3 weeks: “We turned negative in NZD 2 weeks ago. In our latest narrative from yesterday (28 Sep, spot at 0.5635), we indicated that NZD “is likely to break 0.5600 but it remains to be seen whether NZD can decline to the next support level at 0.5565”. NZD subsequently dropped to 0.5565 before rebounding strongly. Downward momentum has waned and the strong rebound amidst oversold conditions suggests the chance of NZD breaking below 0.5565 is low. That said, only a breach of 0.5755 (no change in ‘strong resistance’ level from yesterday) would indicate that NZD is not weakening further.”
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