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The door now seems to be open for NZD/USD to test the 0.7100 neighbourhood in the near-term, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectation for NZD to ‘advance further’ was incorrect as it plummeted to 0.7147 during NY hours before extending its decline this morning. While strong downward momentum suggests further NZD weakness, the sharp and rapid drop is severely oversold and a sustained decline below the major support at 0.7100 appears unlikely. On the upside, 0.7190 is expected to be strong enough to cap any short-term recovery (minor resistance is at 0.7165).”

Next 1-3 weeks: “After NZD moved above the 0.7240 resistance, we highlighted yesterday that ‘the current outlook for NZD is deemed slightly positive as long as 0.7170 is not breached’. The sudden and sharp drop during NY hours came as a surprise as NZD plunged to 0.7147 before extending its decline this morning. The risk has shifted to the downside towards 0.7100. A break of this solid support would open up the way for a move to 0.7060. Overall, NZD is expected to remain under pressure unless it can move above 0.7220. On a shorter-term note, 0.7190 is already a strong resistance.”