Currency markets are getting volatile again after the confirmation of the new Fed Chair, Kevin Warsh. The past week's flows turned away from the Middle East events and the Trump-Xi meeting to focus on what’s coming next for the US dollar. Global FX majors took a large hit from the balance sheet emptying themes, hurting the NZD hard, but the Kiwi dollar attempts a rebound to start the new week.
Currency markets have become quite volatile again after Kevin Warsh was confirmed as the new Federal Reserve Chair.
In the past week, market participants shifted their attention away from Middle East tensions and the Trump-Xi summit to focus on what might happen next with the US dollar.
Major global currencies dropped sharply as these macroeconomic themes changed, and high-beta, risk-on currencies like the New Zealand dollar were hit especially hard. Still, the Kiwi dollar is now trying to recover as the new week begins.
This sharp volatility is mainly caused by what traders are calling the Warsh Trade.
Investors are reacting to the new Fed Chair’s plan to sharply reduce the Federal Reserve’s balance sheet, which is one of his core goals and a central part of his thesis. As the Fed is slowly being priced to pull liquidity from the Market, global risk assets and risk-on currencies like the NZD are under pressure – this would mark a new market regime compared to the post-Great Financial Crisis model. From these flows, the US dollar saw strong demand late last Friday.
Since this market story is still in development, it will likely appear in unpredictable ways.
Traders are fading the uncertain moves in NZD/USD as the market adjusts to the start of the new week, with the Kiwi dollar rebounding about 500 pipettes from its Globex open levels. The pair is back in a descending channel as the new market narrative has brought some strength to the greenback, but the correction is taking a break, for now.
This uneven FX momentum is likely to continue until the new Fed Chair provides his first speech at the FOMC meeting on June 17.
NZD/USD 4H chart, May 18, 2026. Source: TradingView. Past performance is not indicative of future results.
Resistance levels
- 0.5885 to 0.59 minor resistance
- 0.5930 to 0.5950 pivotal resistance
- May highs 0.59910
- March resistance 0.60 to 0.60150
Support levels
- 0.58250 to 0.5850 December 2025 pivot
- 0.5770 to 0.5790 key support
- Main support 0.57 (+/- 15 pips)
- Minor support 0.5650
Footnotes:
This article and its contents are intended for educational purposes only and should not be considered trading advice. Forex trading is high-risk. Losses may exceed deposits.
