There is still room for the New Zealand Dollar (NZD) to drop below 0.6000, UOB Group FX strategists Quek Ser Leang and Peter Chia note.

Set to drop towards 0.5980

24-HOUR VIEW: “Last Friday, when NZD was trading at 0.6045, we held the view that NZD ‘is likely to decline.’ We highlighted that ‘support levels are at 0.6030 and 0.6005.’ We also highlighted that ‘0.6005 is likely out of reach for now.’ Our view of NZD declining was correct. However, it dropped more than expected, almost reaching 0.6005 (low has been 0.6006). The rebound in early Asian trading today indicates slowing momentum. This, combined with oversold conditions, suggests that instead of continuing to weaken, NZD is more likely to trade in a sideways range of 0.6010/0.6045.”

1-3 WEEKS VIEW: “We highlighted last Wednesday (17 Jul, spot at 0.6070) ‘downward momentum is building, but not sufficiently enough to suggest the start of a sustained decline.’ After NZD dropped, we highlighted on Friday (19 Jul, spot at 0.6045) that ‘downward momentum has increased further, and the chance of NZD breaking below 0.6030 has also increased.’ We added, ‘the next level to watch below 0.6030 is 0.6005.’ NZD subsequently fell to a low of 0.6006. From here, oversold short-term conditions could lead to a couple of days of sideways trading. As long as 0.6070 (‘strong resistance’ level previously at 0.6085) is not breached, there is room for NZD to drop to and possibly below 0.6005. Looking ahead, the next support below 0.6005 is at 0.5980.”