NZD/USD: Sustained break below 0.5570 seems unlikely – UOB Group

Scope for the New Zealand (NZD) to test the 0.5570 level; a sustained break below this level seems unlikely. In the longer run, risk for NZD is beginning to shift to the downside, but it must break clearly below 0.5570, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD is beginning to shift to the downside

24-HOUR VIEW: “While we expected NZD to ‘continue to weaken’ yesterday, we pointed out that ‘oversold conditions suggest any decline is unlikely to break clearly below 0.5570.’ Our view was validated, as NZD dropped to a low of 0.5572, rebounding to close at 0.5600 (-0.14%). While downward momentum has slowed somewhat, there is scope for NZD to test the 0.5570 level. A sustained break below this level seems unlikely. Resistance is at 0.5610; a breach of 0.5625 would mean that the current downward pressure has faded.”

1-3 WEEKS VIEW: “We noted yesterday (09 Jan, spot at 0.5605) that ‘the risk for NZD is beginning to shift to the downside.’ However, we pointed out that it ‘must break clearly below 0.5570.’ NZD subsequently dropped to 0.5572 before rebounding. We continue to hold the same view as long as 0.5645 (‘strong resistance’ level was at 0.5660 yesterday) is not breached.