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NZD/USD looks to extra consolidation near term – UOB

In opinion of FX Strategists at UOB Group, the Kiwi Dollar is seen extending the consolidation at current levels in the near term.

Key Quotes

24-hour view: “While we expected NZD to weaken yesterday and “test 0.6365″, we were of the view “a sustained weakness is unlikely”. However, NZD cracked 0.6365 and dropped to 0.6342 before settling on a weak note (NY close of 0.6347, -0.47%). From here, further decline would not be surprising but oversold conditions could ‘limit’ any weakness to 0.6300 (there is a relatively strong support level at 0.6330). On the upside, 0.6380 is expected to be strong enough to cap any intraday rebound (minor resistance at 0.6365)”.

Next 1-3 weeks: “We detected the waning momentum early last Friday (13 Sep, spot at 0.6405) and warned that the “odds for further NZD strength have diminished”. After the weak daily closing in NY on Friday, we indicated yesterday (16 Sep, spot at 0.6380) that “a short-term top is in place” and expected NZD to “trade sideways between 0.6330 and 0.6430 for now”. Our view was not wrong even though the relatively large and rapid decline of -0.47% (0.6347) yesterday was not exactly expected. For now, we continue to expect NZD to trade sideways, albeit likely at a lower range of 0.6300/0.6400. Looking forward, if NZD were to register a NY close below 0.6300, it would suggest the early September low of 0.6270 would come under pressure. At this stage, the prospect for a move to 0.6270 is not high”.

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