NZD/USD: To retest the 0.5765 before a more sustained recovery – UOB Group

New Zealand Dollar (NZD) could retest the 0.5765 before a more sustained recovery can be expected. In the longer run, NZD may decline below 0.5770, but it remains to be seen if it can maintain a foothold below this level, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.  

NZD may decline below 0.5770

24-HOUR VIEW: “While we expected NZD to ‘decline further’ yesterday, we indicated that ‘deeply oversold conditions suggest NZD may not be able to break clearly below the major support at 0.5770.’ NZD fell more than expected to 0.5763 before recovering to close at 0.5784 (-0.29%). While there has been no further increase in momentum, NZD could retest the 0.5765 level before a more sustained recovery can be expected. The next support at 0.5740 is not expected to come into view. On the upside, should NZD break above 0.5815, it would mean that the current downward pressure has faded.”

1-3 WEEKS VIEW: “We indicated yesterday (11 Dec, spot at 0.5800) that NZD ‘may decline below 0.5770.’ However, we pointed out, ‘it remains to be seen if it can maintain a foothold below this level.’ NZD subsequently dropped to 0.5763 before recovering. There has been no further increase in momentum. For NZD to decline further, it must hold below 0.5770. The likelihood of this happening will remain intact provided that 0.5845 (‘strong resistance’ level was at 0.5865 yesterday) is not beached. Looking ahead, the next level to monitor below 0.5770 is 0.5740.”