AUD/USD, NZD/USD, and USD/JPY Analysis: Dovish Fed Signals Drive Volatility Across Majors

The release of a weaker ISM Services PMI has kept pressure on the US Dollar Index, allowing AUD/USD to recover from the 0.6450 level. The chart below shows that the ISM services PMI has dropped to 50.1, and a drop below 48.6 would indicate a recession.

Moreover, the weak employment data keeps the pressure on the US dollar due to the Fed rate cuts this year. However, the strong data from Australia boosted the Australian dollar’s momentum.

The chart below shows Australia’s Services PMI rising to 54.1, while the Composite PMI inched up to 53.8, signalling steady growth across both manufacturing and services. This resilience supports the Aussie. However, gains may be limited as markets widely expect the RBA to cut rates on August 12. A dovish stance could cap AUD/USD rallies, while a “hawkish cut” or softer outlook on future reductions might help cushion any downside.

USD/JPY has been reacting to changes in yields. As softer US data emerged and expectations for Fed rate cuts grew, Treasury yields moved lower, narrowing the yield gap and increasing demand for the Yen.

Consequently, USD/JPY faces downside pressure. However, the hotter-than-expected Prices Paid data serves as a reminder that the Fed may not ease policy quickly. If yields rebound, USD/JPY’s carry trade appeal could return.

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. The recent correction was driven by the USD Index’s strength toward 100.50. This correction found support for AUD/USD at the 0.6450 level. The pair is rebounding from this support and appears poised to move higher. As the USD Index continues to decline from 100.50, bullish momentum in AUD/USD is increasing, potentially lifting the pair to higher levels.

Key support levels remain at 0.6450, 0.6380, and 0.6320. A break below 0.6320 would be bearish and could push AUD/USD lower. However, as long as the pair stays above 0.6450, there is potential for a move toward the 0.6700 level. This 0.6700 level is a long-term resistance line, and a break above it could drive AUD/USD to further gains. The RSI for AUD/USD is currently above 50, indicating strong bullish momentum.

NZD/USD Technical Analysis – Bullish Price Development

The 4-hour chart for NZD/USD shows that the pair has been consolidating within a broad range while maintaining a bullish structure. The strong rebound from the long-term support at the $0.55 level during Trump’s tariffs has established a solid bullish case for NZD/USD. This bullish momentum has developed following significant bearish pressure on the US Dollar Index.

Key support for NZD/USD remains at 0.5870. As long as the pair stays above this level, it is likely to trade higher toward 0.6120. A break above 0.6120 would be bullish and could drive the pair to further highs. The emergence of rounding bottoms above 0.5870 since May 2025 has strengthened the bullish outlook for NZD/USD. Therefore, any correction in the pair is considered a buying opportunity.

USD/JPY Technical Analysis – Neutral Zone

The 4-hour chart for USD/JPY shows that the pair has been consolidating within a long-term range between the 140 and 151 levels. As the US Dollar Index failed to break above the 100.50 level, USD/JPY also was unable to break above the 151 resistance.

After hitting this strong resistance, the pair broke below 148.30 and continues to trade lower. The near-term outlook for USD/JPY remains strongly bearish, with the next target near 142. A break below 140 would breach the long-term support and could trigger a sharp drop in the pair.

The orange zone on the chart highlights a key consolidation area. As long as the pair remains within this zone, the overall direction will remain uncertain.