AUD/USD, NZD/USD, and USD/JPY Analysis: Fed Policy and Trade Talks Shape Short-Term Trends

Fed’s Cautious Stance Pressures AUD/USD Amid Rate Cut Uncertainty

The Federal Reserve’s decision to steady interest rates sharply impacted AUD/USD. Although steady rates were expected, Fed Chair Jerome Powell’s remarks dampened hopes for early rate cuts. He emphasized the need for more economic data before adjusting policy, reinforcing a cautious and patient stance.

AUD/USD consolidates in tight ranges following Powell’s press conference. The pair had touched a five-month high of 0.6514 but quickly reversed as Powell ruled out preemptive easing. His tone signaled that despite growing concerns over inflation and unemployment, the Fed remains reluctant to act without clear signals. This shift in expectations weighed heavily on risk-sensitive currencies.

Moreover, Powell mentioned that trade tariffs and their potential to disrupt the inflation and employment goals for 2025 further clouded the policy path. The chart below shows that the inflation expectations have increased to 4.4% in April 2025. With the Fed committed to a balance sheet reduction and remaining data-dependent, the US dollar consolidates within the range, which results in AUDUSD consolidation.

On the other hand, upcoming high-level trade talks between the US and China have injected optimism into the outlook for the Australian Dollar. AUD benefits from its close economic ties with China, and hopes for easing trade tensions have limited further downside.

USD/JPY Rebounds as US-China Trade Talks Shape Market Direction

Moreover, the Reserve Bank of Australia (RBA) faces economic challenges. Despite some positive data, such as a slight improvement in the Ai Group Industry Index, the economy has now seen 33 straight months of contraction. Markets expect the RBA to cut its rate by 25 basis points to 3.85%, which could pressure AUD/USD. The chart below shows that the interest rates were steady in March and April.

USD/JPY also rebounds higher after the Fed’s message. After failing to break the 140 support level, the pair reversed higher. Powell’s hawkish tone revived US Dollar demand, pushing USD/JPY back into its prior range. However, the pair remains within a descending broadening wedge, and upside potential may stay limited unless it breaks above key resistance zones at 147 and 151.

AUD/USD Technical Analysis – Consolidation

The 4-hour chart for AUD/USD shows that the pair is consolidating near the edge of a symmetrical broadening wedge. The price is between $0.64 and $0.65, indicating strong volatility. This narrow range suggests that a breakout is imminent. A move outside this consolidation zone will likely define the next direction for AUD/USD. Weakness in the US dollar has pushed AUD/USD higher from its long-term support, indicating bullish price action.

NZD/USD Technical Analysis – Consolidation

The 4-hour chart for NZD/USD shows that the pair is consolidating above the strong support at $0.5890 and looks set to trade higher. It found support between $0.55 and $0.56 in the long-term zone, suggesting the potential for continued upside. A break above $0.60 will confirm sustained bullish momentum in NZD/USD.

USD/JPY Technical Analysis – Descending Broadening Wedge

USD/JPY failed to break the long-term pivot of 140 and rebounded higher. However, the pair trades within a descending broadening wedge pattern, which suggests ongoing bearish pressure until it breaks above the 147 and 151 levels. As long as the pair remains within this pattern, the likelihood of a negative bias persists in USD/JPY.