Oversold decline has not stabilised; New Zealand Dollar (NZD) could drop further, but a sustained break below 0.5640 is unlikely. In the longer run, rapid increase in momentum suggests NZD is likely to continue to head lower; the major support at 0.5610 may not come into view so quickly, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

NZD is likely to continue to head lower

24-HOUR VIEW: "After trading in a range for a few days, NZD lurched lower yesterday, falling sharply to a low of 0.5649. While oversold, the decline has not stabilised. Today, provided that NZD holds below 0.5710 (minor resistance is at 0.5690), it could drop further toward the significant support level at 0.5640. Given the oversold conditions, a sustained break below this level is unlikely."

1-3 WEEKS VIEW: "In our most recent narrative from last Wednesday (26 Mar, spot at 0.5730), we highlighted that NZD 'is likely to edge lower toward the major support zone between 0.5650 and 0.5670.' We also highlighted that 'while the likelihood of NZD breaking this support zone is not high, the downward bias will remain intact provided that NZD remains below 0.5770 (‘strong resistance’ level).' NZD subsequently traded in a range, holding below 0.5770 until yesterday, when it plummeted below the support zone, reaching a low of 0.5649. The price action has resulted in a rapid increase in momentum, and we continue to expect NZD to trade lower. However, the next support at 0.5610 may not come into view so quickly. On the upside, the ‘strong resistance’ level has moved lower to 0.5725 from 0.5770."