The New Zealand (NZD) is likely to trade in a sideways range of 0.5965/0.6015 or to continue to recover. Overbought short-term conditions could lead to a couple of days of sideways trading, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

The next level to watch is 0.6035

24-HOUR VIEW: “Two days ago, we expected NZD to rise. When our view did not turn out, we indicated yesterday that ‘we continue to see room for NZD to rise, even though any advance is unlikely to break clearly above 0.6010 (next resistance is at 0.6035).’ Our view was not wrong, even though NZD rose more than expected, reaching a high of 0.6025. NZD subsequently pulled back from the high, closing at 0.5994 (+0.66%). The pullback amid slowing momentum and overbought conditions suggests that NZD is unlikely to continue to advance. Today, it is more likely to trade sideways, probably in a range of 0.5965/0.6015.”

1-3 WEEKS VIEW: “On Tuesday (06 Aug, spot at 0.5975), we highlighted that ‘the recent price action continues to suggest NZD could recover, possibly towards 0.6035.’ Yesterday (Wednesday), NZD rose to 0.6025 before pulling back. We continue to expect NZD to recover, even though overbought short-term conditions could lead to a couple of days of sideways trading first. On the downside, a breach of 0.5940 (‘strong support’ previously at 0.5890) would indicate that NZD is not recovering further. Looking ahead, the next level to watch above 0.6035 is at 0.6065.”