Further range trading seems likely, expected to be in a range of 0.5875/0.5920. Further New Zealand Dollar (NZD) weakness is not ruled out; severely oversold conditions suggest limited downside potential. The level to monitor is 0.5850, UOB Group FX analysts Quek Ser Leang and Peter Chia note.

The level to monitor is 0.5850

24-HOUR VIEW: “After NZD fell to a low of 0.5878 last Thursday, we indicated on Friday that ‘severely oversold conditions and tentative signs of slowing momentum indicate that NZD is unlikely to weaken much further.’ We expected NZD to trade in a range between 0.5870 and 0.5920. Our view of range trading was not wrong, even though NZD traded in a narrower range of 0.5884/0.5905, closing largely unchanged at 0.5889 (+0.09%). The price action provides no fresh clues, and further range trading seems likely. Expected range for today: 0.5875/0.5915.”

1-3 WEEKS VIEW: “Last Friday (26 Jul, spot at 0.5890), we indicated that ‘while further NZD weakness is not ruled out, severely oversold conditions suggest limited downside potential.’ We indicated that ‘the next level to monitor is 0.5850.’ We continue to hold the same view. Overall, only a breach of 0.5955 (no change in ‘strong resistance’ level from last Friday) would suggest that NZD weakness that started more than a week ago has come to an end.”