Further New Zealand Dollar (NZD) strength is not ruled out; severely overbought conditions suggest any advance is likely limited to a test of 0.6260, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note.

NZD may try to test 0.626

24-HOUR VIEW: “Our view of sideways trading last Friday was incorrect, as NZD surged to a high of 0.6236, closing on a strong note at 0.6233 (+1.51%). While further advance is not ruled out, severely overbought conditions suggest any advance is likely limited to a test of 0.6260. The major resistance at 0.6320 is not expected to come under threat. Support levels are 0.6205 and 0.6180.”

1-3 WEEKS VIEW: “We highlighted last Thursday (22 Aug, spot at 0.6160) that ‘overbought advance doesn’t seem to be losing steam yet.’ We held the view that NZD could potentially reach June’s 2023 high of 0.6223.’ Last Friday, NZD broke above 0.6223, surging by 1.51% (NY close of 0.6233). From here, we continue to expect NZD to advance. The next significant resistance lies at the year-to-date high of 0.6320. As conditions are severely overbought, it remains to be seen if this level is within reach. To sustain the overbought momentum, NZD must not break below 0.6140 (‘strong support’ level previously at 0.6090).”