A sustained break below 0.6250 is unlikely – UOB Group

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

NZD may drop to 0.6225 in the long term

24 HOUR VIEW: “Our view of yesterday’s sideways trading was incorrect as NZD fell sharply to 0.6265 before closing on a weak note at 0.6281 (-1.13%). Unsurprisingly, the sharp drop led to a surge in momentum. Today, while the NZD could continue to weaken, oversold conditions suggest that a sustained break below 0.6250 is unlikely. Also, major support at 0.6225 is unlikely to emerge. To maintain the oversold momentum, NZD should not go above 0.6325 with minor resistance at 0.6305.”

WEEKS 1-3: “We have been expecting a higher NZD since the end of last week (as annotated in the chart below). After NZD rallied to 0.6379, we highlighted yesterday (01 Oct, spot at 0.6345) that “there was no further momentum building and it remains unclear whether NZD could rise further to 0.6410”. I also pointed out that “only a breach of 0.6280 (the ‘strong support’ level) would mean that 0.6410 is not visible.” NZD then fell sharply, falling below 0.6280 (low of 0.6265). Not only did the upward momentum disappear, but the downward momentum also increased, although not by much. Right now, we see the current price movements as a pullback that could hit significant support at 0.6225. We will be of the same opinion, provided 0.6350 (‘strong resistance’ level) is not breached.”