The aussie and kiwi are looking to build on the more positive sentiment in the market today
As risk trades were pummeled by omicron fears yesterday, the aussie and kiwi looked like they may crack under the pressure as price made fresh lows for the year.
Ultimately, buyers stood their ground even in the wake of a hawkish surprise from Fed chair Powell as the daily closes were above the August lows for both pairs.
And that is where we are now as buyers will be hoping to build on this double-bottom to try and look for a stronger rebound, risk sentiment permitting that is.
The more positive risk mood is helping with both currencies leading the charge so far today but it will be important to see if buyers can keep up a defense of the August lows if there are more concerns arising from the omicron variant.
The bounce right now is tentative but if there is a strong argument that the fears are overblown, I'd argue that we could see a meaningful rebound in both pairs despite the fact that a more hawkish Fed is just on the horizon.
For some consideration, the market has largely already factored in Fed rate hikes so while Powell's hawkish tone yesterday certainly caught traders by surprise, it is hard to justify a sort of material shift in pricing.
I mean even before the omicron fears, the dollar was already running hot against the rest of the major currencies bloc because of the Fed.
In any case, the risk to any further bounce now is a fall back and daily close below the August lows and therein lies the risk for buyers in chasing any upside move in both pairs.
