FX strategists at UOB Group suggest that ongoing correction in NZD/USD could extend to the area below the 0.6600-handle.

• "24-hour view: Expectation for NZD to 'test 0.6630 first before stabilizing' did not materialize as it traded in a quiet manner between 0.6645 and 0.6680. Downward pressure has dissipated and the current movement is viewed as an on-going consolidation phase. In other words, NZD is expected to trade sideways for today, albeit likely at a higher range of 0.6650/0.6690.
• Next 1-3 weeks: We highlighted last Thursday (02 Jan, spot at 0.6730) that while momentum is still strong, 'severely overbought conditions suggest 0.6790 could be out of reach'. However, the subsequent sharp and swift sell-off that sent NZD plummeting below the 'strong support' at 0.6670 was not exactly expected (NZD dropped to 0.6645 last Friday). The more than one-month-long rally in NZD has likely run its course and last Tuesday's (31 Dec) peak of 0.6755 is deemed as a short-term top and this level may not come into picture for a period. To look at it another way, the current movement is likely the early stages of a pullback and in view the prior strong rally, the size of the pullback could be considerable. All in, NZD is expected to stay on the back-foot from here unless it can move and stay above 0.6730. On the downside, a test of 0.6590 would not be surprising."