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Occasional pullbacks in NZD/USD is expected to meet solid contention in the 0.5870 area, in opinion of FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our view yesterday was that ‘barring a move above 0.6135, NZD is expected to weaken to 0.6060 (next support at 0.6030 is likely out of reach)’. While our expectation for NZD to weaken was correct, the extent of the decline that sent NZD plunging to a low of 0.5956 was unexpected (NZD closed at 0.5997, down by -1.78%, the third largest 1-day decline this year). Despite severely oversold conditions, there is still some room for NZD to weaken to 0.5910. For today, a break of the next support at 0.5870 would come as a surprise. Resistance is at 0.6000 followed 0.6030.”

Next 1-3 weeks: “While we noted yesterday (15 Apr, spot at 0.6090) that ‘short-term momentum has waned considerably and the odds for further NZD strength have diminished’, we did not anticipate the sped-up price action that sent NZD plunging by a whopping -1.78% (NY close of 0.5997). The near-term risk has shifted to the downside but at this stage, it is too early to expect a major decline. From here, NZD is expected to trade on the back foot unless it can move above 0.6050. On the downside, 0.5870 is a solid support.”