NZD/USD potential double-top ahead? – UOB

FX Strategists at UOB Group believes the pair could be charting a double top in the near term.

Key Quotes

24-hour view: “While we expected a lower NZD yesterday, we were of the view that “0.7240 is likely out of reach”. The decline exceeded our expectation as NZD hit an overnight low of 0.7232. The rapid drop appears to be running ahead itself but a push lower towards 0.7205/10 would not be surprising. The next support is at 0.7175 and is level unlikely to come into the picture for now. On the upside, only a move back above 0.7285 would indicate that the current weakness has stabilized (minor resistance is at 0.7255)”.

Next 1-3 weeks: “We have held the same view since last Wednesday (21 Feb, spot at 0.7340) that NZD is potentially forming a ‘double-top’. We highlighted that a break of the strong 0.7270 support could lead to a sharp and rapid decline towards the ‘neck-line’ at 0.7176. In line with expectation, NZD cracked 0.7270 on the second try (low of 0.7271 last Friday, 23 Feb) and plunged to an overnight low of 0.7232. The 0.7176 ‘neck-line’ is acting as a ‘magnet’ now and barring a move back above 0.7320 within the next few days, we expect this level to be at least ‘tested’. On a shorter-term note, 0.7285 is already a rather strong resistance”.