Strong momentum is likely to lead to further the New Zealand Dollar (NZD) weakness. NZD is likely to continue to weaken, but the major support at 0.6040 is unlikely to come under threat for now, UOB Group strategists note.

Break above 0.6135 to stop the downside momentum

24-HOUR VIEW: “We did not anticipate NZD to drop sharply to 0.6075 (we were expecting sideways trading). While strong momentum is likely to lead to further weakness, given that conditions are oversold, the major support at 0.6040 is unlikely to come under threat (there is another support at 0.6060). To keep the momentum going, NZD must stay below 0.6110 (minor resistance is at 0.6095).”

1-3 WEEKS VIEW: “We have held the same view that NZD ‘is likely to drift lower to 0.6085’ since last Tuesday (18 Jun, spot at 0.6130). After more than a week, our view materialised, even though instead of drifting lower, NZD fell sharply 0.6075 in NY trading. The sharp drop has resulted in a rapid increase in momentum, and NZD is likely to continue to weaken. The next support level to watch is 0.6040. Overall, only a breach of 0.6135 (‘strong resistance’ level previously at 0.6160) would mean that NZD is not weakening further.”