The Antipodean currencies (AUD and NZD) have both come under pressure in recent weeks, as the US dollar has surged (US dollar futures/DXY is +8% since early October).
The Australian dollar, in particular, has been weak and is now trading close to major long-term lows (see fig 1). Those lows are around the AUS$0.60 – $0.63 level, and have been key support on multiple occasions going back to the 1980s (including during the GFC). The New Zealand dollar has also sold off but is not yet at equivalent major local lows. In both cases, market sentiment is broadly negative, with traders short the currencies. Of late, rate differentials have been a dominant driver of the currency direction.
On that front, the latest data shows a marked divergence in interest rate trajectories. Over the past three months, the US–NZ 1-year yield spread has widened noticeably (fig 1d), reflecting primarily a faster anticipated pace of cuts in New Zealand over the next 12 months (124 bps of cuts priced in NZ vs. 37.5 bps in the US by end-2025). By contrast, the Australian–US 1-year spread has been more stable, although markets are still looking for 75 bps of RBA cuts over the same timeframe. The 2-year yield spread (fig 1c) has also closely tracked movements in AUDUSD in recent weeks, underscoring the importance of policy expectations.
From a technical perspective, the setup for both AUD and NZD is looking increasingly stretched. Our medium-term scoring systems are on/near strong BUY for both the Aussie and the Kiwi (fig 1a), while the short-term models are generating (an albeit weaker) BUY signal (fig 1b). Added to that, positioning for the NZD is at its most net SHORT on record, while positioning in the AUD has recently flipped back to net SHORT (although is not yet extreme).
In summary, both currencies are at or near key support zones, underpinned by increasingly oversold technicals and extreme positioning. That said, the broader macro backdrop — particularly divergent rate expectations and ongoing US dollar strength — remains a headwind. Whether these oversold levels ultimately hold will hinge on upcoming central bank guidance, forthcoming Trump policies, evolving macro data, and shifts in global risk sentiment. Technically, though, these currencies are looking increasingly interesting.
Fig 1: USD-AUD candlestick futures, shown with 200 day moving averages
Fig 1a: AUD medium term ‘technical’ scoring system vs. USD-AUD
Fig 1b: NZD short term ‘technical’ scoring system vs. USD-NZD
Fig 1c: Two year government yield spread (Australian less US) vs. USD-AUD
Fig 1d: One year government bond yield spreads: ‘US less Australian’ & ‘US less NZ’
