AUD/USD and NZD/USD Rally on Trade Optimism, USD/JPY Faces Resistance

AUD/USD Rises as Trade Optimism and RBA Pause Lift Sentiment

AUD/USD extended gains and tested the 0.6600 resistance level on Wednesday. This marked the fourth consecutive session of gains for the Australian Dollar. Improved risk sentiment from the US-Japan trade agreement supported the Aussie. At the same time, the US Dollar gained only mildly as trade jitters eased.

Recent weak jobs data in Australia failed to dent AUD’s momentum. Unemployment rose to 4.3%, and job creation slowed. However, the rally in AUDUSD is due to the drop in the US dollar index.

The Reserve Bank of Australia held rates steady, citing falling inflation expectations. The chart below shows that the consumer inflation expectations in Australia have dropped to 4.7% in July 2025. This drop in inflation suggests a more balanced outlook for inflation risks amid continued labour market strength.

Moreover, the minutes from the RBA meeting revealed a cautious tone despite the pause. Most members expected inflation to drift lower, allowing room to cut later. A minority argued for immediate easing due to weak growth signals. This divide reinforces a dovish outlook that could weigh on the AUD in the longer term.

On the other hand, China’s recovery adds mixed signals for the Aussie outlook. Strong factory growth contrasts with weak retail spending. The PBoC held rates steady, signalling a wait-and-see approach. Moreover, sluggish Chinese consumer demand could cap AUD gains in the near term.

USD/JPY Weakens on Political Risk and Hawkish BOJ Expectations

USD/JPY dipped slightly after failing to break key resistance near 148.30. The pair remains under pressure following multiple failed breakouts. Traders are cautious amid uncertainty over Japanese PM Ishiba’s leadership. Though resignation rumours were denied, the political risk weighs on sentiment.

The new US-Japan trade deal introduced fresh friction. A 15% US tariff and relaxed Japanese auto import rules created concern. The deal didn’t fully lift the USD as expected, muting bullish momentum. Traders are now watching the broader impact on bilateral economic ties.

Rising Japanese yields narrowed the US-Japan rate spread. This helped strengthen the Yen, particularly as the BoJ regains confidence. The BoJ paused its tightening due to recent uncertainty but may now resume. If normalisation resumes, the JPY may gain further strength against the USD.

AUD/USD Technical Analysis – Ascending Broadening Wedge Pattern

The 4-hour chart for AUD/USD shows that the pair is consolidating within an ascending broadening wedge pattern. These consolidation forms a bullish price structure above the 0.64 area. A break above 0.6620 could trigger a move toward 0.6690. However, 0.6690 remains a key long-term resistance level. Given the persistent bearish pressure on the US Dollar Index, a breakout above this resistance is likely. The pair is expected to trade higher, supported by continued weakness in the USD.

NZD/USD Technical Analysis – Bullish Price Development

The 4-hour chart for NZD/USD shows that the pair has broken above the descending channel and is trending higher. The immediate resistance is at the 0.6120 level, where the pair may face some consolidation. A confirmed break above 0.6120 could initiate a strong upward trend in the NZD/USD pair.

USD/JPY Technical Analysis – Neutral Zone

The 4-hour chart for USD/JPY shows that the pair is retreating from the 148.30 resistance level. Multiple failed attempts to break above 148.30 have kept USD/JPY under pressure. Moreover, continued bearish momentum in the US Dollar Index may weigh further on USD/JPY. A confirmed break below the 140 level could trigger a deeper decline toward lower support zones.