- USD slide stalls in late trade
- AUD and NZD among week’s strongest FX performers
- Strength leaves both exposed if USD tone shifts
Summary
Markets rarely move in straight lines. With many of the FX majors finishing off their session highs on Tuesday against the Greenback, I cannot help but think we may see a minor bid emerge in the U.S. dollar, putting short setups in play for those names that outperformed earlier this week. AUD/USD and NZD/USD may have rallied hard, but both have stalled where sellers have stepped in before. Momentum still leans bullish, yet the hesitation late Tuesday suggests a pullback may be in play.
AUD/USD Rally Stalls at Range Highs
Source: TradingView
AUD/USD has returned to the top of its trading range due to the offer in the big dollar, rising briefly above 0.6740 before retracing slightly into the close. Sellers were lurking around these levels in late December, making current levels interesting for short setups should the USD catch a bid.
If AUD/USD is unable to break and hold above 0.6750, it would allow for shorts to be set beneath the level with a stop above the December high to protect against reversal, targeting a retest of 0.6680, near the bottom of the current range where buyers were nibbling away for periods earlier this year.
RSI (14) may be above the neutral 50 level but the overall trend has been lower, pointing to dissipating upside strength that questions whether this bounce has legs. MACD has been doing the same but is now curling back towards the signal line, providing something of a conflicting message should we see a bullish crossover. In this environment, I am putting more emphasis on price action than retention of a specific directional bias.
Kiwi Rocket Hits Turbulence
Source: TradingView
NZD/USD is another candidate worth watching. It had been coiling in something resembling a falling wedge over late 2025 and early 2026 before breaking out spectacularly on Monday, returning to where the pattern started before stalling, as convention would suggest. While the price action and momentum picture remains bullish, given the Kiwi has struggled around these levels previously, another failure here would make a countertrend short look appealing, especially with the 200-day moving average hovering overhead.
Should we see another failed breakout attempt above 0.5843 resistance, shorts could be established with a stop above the level for protection, targeting 0.5800 initially given the pair tends to gravitate towards big figures. Beyond that, if the unwind were to become more significant, the 50-day moving average would be in play.
The short setup conflicts with the messaging from RSI (14) and MACD which is bullish. The former is moving away from 50 but not yet overbought, while the latter has delivered a bullish crossover of the signal line and is now pushing higher. That favours upside over downside, but in headline driven markets like these, the overall signal on directional risks may not be as reliable as other periods.
Yuan Watch
As covered briefly in a separate note, the Kiwi and Australian dollar have been strongly correlated with movements in the Chinese yuan over the past week against the U.S. dollar, sitting with correlation coefficients of 0.89 and 0.93 respectively. It may therefore pay to keep a close eye on the performance of the CNH on Wednesday.
