NZD/USD likely to test 0.6235 in near term – UOB

FX strategists at UOB Group expect the NZD/USD could drop to 0.6235 in the near term after the recent rate cut by the RBNZ and the weakness around the pair.

• "24-hour view: NZD unexpectedly sank to a low of 0.6378 (-2%) before paring losses to close at 0.6444 (-1.2%). With the sharp move, the downtrend has clearly resumed and lower levels of NZD can be expected. That said, downside momentum is in early stages of rebuilding and another down move of similar scale as yesterday is unlikely. Expect support at 0.6435 and 0.6385 while rallies should be limited to 0.6485. Only a move above 0.6530 would indicate that downside pressures have eased.
• Next 1-3 weeks: Our last narrative was from 1 Aug (spot at 0.6555) where we expect NZD to trade with ‘downside bias’ towards 0.6500. On Wed (7-Aug), the key support at 0.6500 was decisively taken out and NZD tumbled to a low of 0.6378. With the move, it immediately shifts the focus to the next ‘key supports’ of 0.6348 (last reached in Jan 2016) and 0.6235 (Sep 2015’s low). At the current juncture, although the ‘downside bias’ remains, downside momentum is still not strong enough to argue for a fast move towards those stated levels. We expect stiff resistances at both 0.6480 and 0.6500 and only a recovery above 0.6530 would indicate that downside pressures have eased."