In opinion of FX Strategists at UOB Group, gains should pick up pace on a breakout of 0.6630.
Key Quotes
24-hour view: “NZD closed on a strong note yesterday (NY close of 0.6554, +0.69%) before extending its gain after NY close (high of 0.6598 at the time of writing). The strong rally is running too fast, too soon and while NZD could peek above 0.6600, we do not expect a sustained break above this level (next resistance is at 0.6630). Support is at 0.6550 followed 0.6530. Yesterday’s low of 0.6497 is not expected to come into the picture”.
Next 1-3 weeks: “While we expect NZD to trade sideways, we highlighted last Friday (12 Oct, spot at 0.6525), “the prospect for a break above 0.6560 has increased but the next resistance at 0.6600 is likely strong enough to thwart any further advance in NZD (at least for another one week or so)”. NZD hit a high of 0.6557 during NY hours yesterday before blasting above 0.6560 after the release of the stronger than expected NZ inflation data earlier this morning. The high at the time of writing is 0.6598 and in view of the vastly improved momentum, a break above 0.6600 would not be surprising. That said, we have doubts about the sustainability of the current NZD strength and in our view, only a clear break of 0.6630 would indicate that NZD is ready for a stronger recovery towards the September’s peak near 0.6700. All in, NZD is expected to stay underpinned from here as long as the ‘key support’ at 0.6500 is intact”.
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