AUD/USD, NZD/USD, and USD/JPY Analysis: Bearish Setups Deepen on Rate Divergence and China Fears

AUD/USD Extends Slide as Fed Repricing and RBA Dovish Shift Weigh on Aussie

The AUD/USD pair extended its decline for the third straight day, reaching a fresh three-week low. This continued weakness reflects a shift in sentiment as investors scale back expectations of aggressive Fed easing.

The US Producer Price Index showed the fastest increase since 2022, reigniting inflation concerns. The high inflation data and a weaker performance in equity markets drove renewed interest in the US dollar. As a result, money flowed out of the risk-sensitive Australian dollar.

Moreover, the pressure on the Aussie intensified after the Reserve Bank of Australia delivered a dovish tone earlier this month. The central bank cut its 2025 growth forecast to 1.7%.

Governor Michele Bullock suggested that interest rates may need to stay lower to stabilise inflation and left the door open for additional cuts. Therefore, markets expect a rate cut in November and possibly two or more by the end of the year. Even with strong economic data such as surging trade, the RBA’s cautious stance continues to weigh on the AUD.

Geopolitical Risks and China’s Slump Add to AUD/USD Bearish Outlook

Moreover, the geopolitical uncertainty adds another layer of pressure on the pair. Diplomatic developments around the Russia-Ukraine conflict gained momentum this week, with discussions of bilateral and multilateral meetings involving major world leaders. However, Russian attacks on Ukraine persist, underscoring the volatility in the region. While Trump hinted at limited military involvement, the situation remains tense.

On the other hand, traders are waiting for key events that could inject fresh volatility. The market’s primary focus is on Jerome Powell’s upcoming speech at the Jackson Hole Symposium. Any hint of tightening or caution from the Fed Chair may fuel further dollar strength, keeping the AUD under pressure.

Australia’s housing market provided mixed signals. Dwelling approvals surged 11.9% in June, marking the monthly gain since May 2023. However, the jump was mainly due to non-house dwellings, while approvals for private sector houses declined slightly. This uneven growth adds to the uncertainty about the strength of Australia’s economic recovery and limits the Aussie’s upside potential.

On the other hand, China’s latest manufacturing data offered little support. The official PMI dropped to 49.3 in July, below expectations and in contraction territory for the fourth straight month.

New orders and foreign sales dropped significantly, showing that export momentum is fading amid looming tariffs. China is Australia’s largest trading partner. Its economic slowdown has a direct negative impact on the AUD, amplifying the broader bearish tone.

AUD/USD Technical Analysis – Price Uncertainty

The 4-hour chart for AUD/USD shows that the pair has broken below the 0.6440 level. A head and shoulders pattern formed near the 0.6550 resistance, followed by a breakdown below 0.6440. This technical structure suggests that the short-term trend remains bearish.

The breakdown could push the pair toward the immediate support at 0.6380. A break below 0.6380 may lead to a drop toward the 0.6320 level.

However, despite this bearish setup, the overall direction remains uncertain. The pair appears oversold in the current region, increasing the possibility of a rebound. As long as the price stays below 0.6550, the short-term bias will remain bearish. However, a break above 0.6550 would shift the short-term outlook to bullish.

NZD/USD Technical Analysis – Breakdown from Support

The 4-hour chart for NZD/USD shows that the pair has broken below the 0.5870 support and continues to trade to the downside. However, the pair is now extremely oversold at current levels, which may trigger a rebound toward the 0.5870 region.

As long as the price remains below the 0.5970 level, the short-term direction is likely to stay bearish. However, the broader pattern shows a bullish structure, with strong support established between the 0.55 and 0.56 region.

Therefore, this correction in NZD/USD could lead to a rebound toward the 0.6140 level once the downward phase completes.

USD/JPY Technical Analysis – Negative Price Action

The 4-hour chart for USD/JPY shows that the pair is trading within a sideways range between the 140 and 151 region. However, the pair failed to break above the 151 level in July 2025 and formed a head and shoulders pattern with a neckline at 146. A break below 146 would likely trigger a strong downside move toward the 142 level.