Further New Zealand Dollar (NZD) declines are not ruled out, but any weakness is likely part of a lower range of 0.5905/0.5950. In the longer run, NZD has likely entered a 0.5880/0.5980 consolidation phase, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

NZD declines are not ruled out

24-HOUR VIEW: "While we expected NZD to 'rise further' yesterday, we pointed out that 'overbought conditions suggest that it may not be able to break clearly above 0.6000.' We added, 'if NZD breaks below 0.5950, it would mean that it is likely to range trade instead of heading higher toward 0.6000.' NZD then rose to a high of 0.5991 and then in a surprising move, plunged to a low of 0.5910. Further declines are not ruled out, but given the oversold conditions, any weakness is likely part of a lower range of 0.5905/0.5950."

1-3 WEEKS VIEW: "We turned positive on NZD last Friday (08 Aug, spot at 0.5960), but we highlighted that “it is currently unclear if it can reach 0.6000.” After NZD rose to a high of 0.5997 two days ago, we stated yesterday (14 Aug, spot at 0.5980) that “while increasing upward momentum continues to suggest a higher NZD, it must first close above 0.6000 before further advances are likely.” We did not expect NZD to drop sharply to 0.5910. The breach of our ‘strong support’ level at 0.5930 indicates that NZD is not rising further. NZD has likely entered a consolidation phase, expected to be between 0.5880 and 0.5980."