The Australian and New Zealand dollars are higher to start the week why the US dollar index is modestly lower.
Westpac notes that the US dollar index is in primed for further gains:
DXY looks like it’s charting a quick sprint toward 99-100 in the coming weeks as markets rush to price in a more abrupt Fed policy tightening – a higher terminal rate, tail risk of a 50bp March lift-off and a more aggressive drawdown in the Fed’s balance sheet. DXY has yet to fully price in the yield support that has formed in the last several months, much less what could be in store in coming months. This week’s Jan ISM surveys and payrolls will look weak due to Covid-caution, but that is unlikely to derail the USD. DXY a buy on retracements back toward the mid-96s.
Here is what they have to say about AUD and NZD:
A$ - We had been arguing for a stronger US$ into the Fed meeting for some time so not surprised to see the market moves post the meeting and press conference, though the speed of the move into the end of the week was aggressive. We argued last week that the break of the key band of support at 0.7150/75 opened up a potential push below 0.7000 and a break and close below this level would complete an 18 month Head and Shoulders formation, adding to significant downside risks. We would not be getting too bearish at these levels though given this week’s run of risk events with the RBA Tuesday, the RBA Governor’s Press Club speech Wednesday and the SoMP Friday.
NZ$ - The multi-week decline persists, with 0.6510 (Sep 2020 low) the next downside target.0.6550 (Oct 2020 low). We remain short NZD/USD (trade idea) from 0.6735, and having reached our 0.6600 target we lower the trailing stop to 0.6600. Multi-month, we remain bearish NZD/USD, with a stronger US dollar expected as the Fed’s stance tightens and markets ratchet interest rate expectations higher.
Note that it's a holiday in New Zealand today.