Risk assets took a bit of a turn yesterday and both the AUD and NZD were on the receiving end.

The USD was already relatively strong in US trade and the FOMC minutes just helped to add a little bit more spark to the Greenback. This, in turn, led to some downside pressure in the majors and stocks and both the Kiwi and Aussie saw some selling.

Just yesterday, we were saying that the AUD/USD in particular, could be strong, if it could just hold those highs, which at the time were 0.7240 or thereabouts. Since that point, we’ve seen price not only fall through that level but also back through the 0.7200 level as well. This is quite bearish in the context of what has been happening. Another giveaway is perhaps the latest run up in both risk assets and stocks has been the fact that it is on low volume. A breakout is much more potent if there is volume associated with the break. At the moment, that just doesn’t seem to be there.

The story is similar in the NZD/USD, however, price was not really near the highs. 0.6700 was really the highs and price was up to the 0.6650 level before taking a sharp u-turn. If we look back, we can see that price has been consolidating for some time and is at similar levels to early June. Clearly the latest COVID flare up hasn’t helped sentiment at all.

Going forward, much of the focus needs to be on the USD. If the Greenback can stage a recovery, that will turn things around for the majors a bit. The AUD/USD still appears to be a bit of a leader and we should look to buy only if we get that break with volume. Importantly – the trendline to the upside is still intact.