Outlook is unclear; New Zealand (NZD) could trade in a range between 0.5570 and 0.5670. In the longer run, current price movements are likely part of a 0.5510/0.5705 range trading phase, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Current price movements are likely part of a range

24-HOUR VIEW: “NZD fell sharply early yesterday morning. We highlighted that ‘the sharp drop in NZD this morning appears to be excessive.’ However, we held the view that NZD ‘could drop further and test 0.5510 before stabilization can be expected.’ NZD fell less than expected to 0.5517 and then jumped, closing at 0.5629 (-0.14%). The outlook is unclear after the sharp swings. Today, NZD could trade in a range, expected to be between 0.5570 and 0.5670.”

1-3 WEEKS VIEW: “When NZD was at 0.5545 yesterday (03 Feb), we were of the view that ‘the risk for NZD is on the downside.’ However, we pointed out that ‘it is worth noting that 0.5510 is a significant support level, and NZD must break and remain below this level before a move to 0.5450 is likely.’ NZD subsequently dropped to 0.5517 and then, in a sudden move, surged above our ‘strong resistance’ level at 0.5630. The breach of the ‘strong resistance’ indicates that the downward pressure has faded. The current price movements appears to be part of a range trading phase, likely between 0.5510 and 0.5705.”