NZD/USD neutral, room for a test of 0.7175/85 – UOB

FX Strategists at UOB Group keep the neutral view on the pair unchanged, while noted there is still the possibility of a visit to the 0.7175/85 in the near term.

Key Quotes

24-hour view: “We highlighted yesterday that “there is scope for a test of the strong 0.7200/05 support before a more sustained recovery can be expected”. In line with expectation, NZD touched a low of 0.7197 but the pace and extent of the subsequent rebound came as a surprise (overnight high of 0.7260). The 0.7197 low is likely a temporary bottom and the current price action is viewed as part of a correction/consolidation phase. In other words, NZD is expected to trade sideways for now, likely between 0.7210 and 0.7265”.

Next 1-3 weeks: “There is not much to add to last Friday’s update (16 Mar, spot at 0.7275) wherein we hold the view that there is scope for NZD to probe the major 0.7175/85 support zone. That said, the continuing sharp and rapid decline was unexpected as NZD lost about -1.6% over last Thursday and Friday, the largest 2-day decline since early February. While the 0.7175/85 support zone is expected to offer solid support, a break of this zone is not ruled out and would indicate that NZD has moved into a bearish phase. The odds for such a move are not that high at this stage but would increase quickly unless NZD can reclaim 0.7300 (0.7265 is already quite a strong resistance level)”.