NZD/USD: Upside faces a tough barrier at 0.7125 – UOB

In opinion of FX Strategists at UOB Group, the positive view in NZD/USD remains unchanged, although the pair is expected to meet a solid barrier at 0.7125 in the next weeks.

Key Quotes

24-hour view: “We highlighted yesterday that ‘despite deeply overbought conditions, it is too soon to expect a sustained pullback’ and we expected NZD to ‘trade between 0.7025 and 0.7070’. However, NZD edged higher to 0.7077 before settling on a firm note at 0.7070 (+0.29%). While upward momentum has not improved by much, there is chance for NZD to test the major resistance at 0.7090 first before a pullback can be expected. For today, the next resistance at 0.7125 is not expected to come into the picture. Support is at 0.7045 followed by 0.7030.”

Next 1-3 weeks: “We have held a positive view in NZD since the middle of last week. In our latest narrative from yesterday (01 Sep, spot 0.7050), we highlighted that deeply overbought conditions could lead to a couple of days of consolidation first but there is scope for NZD to strengthen to 0.7090 next. Instead of consolidating, NZD edged higher to 0.7077. From here, a break of 0.7090 appears likely but it remains to be seen if NZD has enough momentum to challenge the next resistance at 0.7125. All in, only a break of 0.6990 (no change in ‘strong support’ level from yesterday) would indicate that the current NZD strength has run its course.”