24-hour view: We expected NZD to weaken yesterday, and we indicated that the level to watch is 0.6100. NZD fell more than expected as it plummeted to 0.6069. While the decline is oversold, strong downward momentum suggests NZD could dip below June’s low near 0.6050. However, it remains to be seen if NZD can maintain a foothold below this level (the next support is at 0.6020). In order to maintain the momentum, NZD must stay below 0.6120 (minor resistance is at 0.6100). 

Next 1-3 weeks: Yesterday (02 Aug, spot at 0.6130), we noted that “Short-term downward momentum is building rapidly.” We added, “NZD must break and stay below 0.6100 before a sustained decline is likely.” We did not quite expect the sharp drop as NZD plunged and closed lower by 1.14% (NY close of 0.6080). The price actions suggest NZD is likely to continue to weaken. The level to watch is 0.6020, followed by the year’s low near 0.5985. The downside risk is intact as long as NZD stays below 0.6160 (‘strong resistance’ level was at 0.6200 yesterday).