The New Zealand Dollar (NZD) is under mild downward pressure; it is likely to edge lower, possibly testing 0.5835 before the risk of a rebound increases. In the longer run, the underlying tone has softened, but any decline is likely part of a lower trading range of 0.5815/0.5905, UOB Group’s FX strategists Quek Ser Leang and Lee Sue Ann note.

NZD to test 0.5835 before the risk of a rebound increases

24-HOUR VIEW: “On Wednesday, NZD dropped to 0.5865. Yesterday, when NZD was at 0.5880, we were of the view that it ‘could retest 0.5865 before a rebound is likely.’ We indicated that ‘the strong support at 0.5850 is unlikely to come under threat.’ NZD weakened more than expected as it tested the 0.5850 support (low has been 0.5850). As downward momentum is increasing, NZD is unlikely to rebound. Instead, it is likely to edge lower, possibly testing 0.5835 before the risk of a rebound increases again. The next support at 0.5815 is unlikely to come under threat. Resistance is at 0.5875; a breach of 0.5885 would mean that the mild downward pressure has eased.”

1-3 WEEKS VIEW: “We highlighted two days (20 Nov, spot at 0.5910) that ‘upward momentum is beginning to build.’ We added, ‘Provided that NZD remains above 0.5850 (‘strong support’ level), it could rise gradually to 0.5960.’ Yesterday, NZD dropped to 0.5850. The buildup in momentum has dissipated. While the underlying tone has softened, any decline is likely part of a lower trading range of 0.5815/0.5905. In other words, NZD is unlikely to break clearly below 0.5815.”