AUD/USD, NZD/USD, and USD/JPY Analysis: RBA Rate Cut and Fed Policy in Focus

RBA Rate Cut Expectations Weigh Heavily on AUD/USD

The Australian Dollar continues to weaken, extending losses for the third straight day. AUD/USD dropped below 0.6550 and finds support at the 0.6485 level. This decline follows growing expectations that the Reserve Bank of Australia (RBA) will cut rates on Tuesday.

Markets widely expect the RBA to lower the Official Cash Rate by 25 basis points. This would bring the rate from 3.85% down to 3.60%. It would also mark the central bank’s third rate cut in 2025, as shown in the chart below.

The expected rate cut has amplified downside pressure on the Aussie. Risk sentiment has also turned negative as US tariff deadlines approach. These developments have boosted demand for the US Dollar as a Safe Haven.

The chart below shows that Australia’s annual inflation rate remained unchanged at 2.4% in the first quarter of 2025. While steady quarter-over-quarter, it marks the lowest reading since Q1 2021. Notably, services inflation eased to 3.7%, the softest pace since the second quarter of 2022, down from 4.3% in the previous quarter. Slower increases in rents and insurance costs primarily drove the moderation.

Moreover, the economic data support a dovish outlook. GDP expanded just 0.2% in Q1, while retail sales and business confidence remain weak, keeping domestic demand sluggish.

The RBA’s policy statement will be key for the next move in AUD/USD. If the bank signals more easing ahead, the Aussie could face further losses. Continued trade tensions may also compound the currency’s downside risk.

USD/JPY Gains as US Dollar Finds Support Amid Risk-Off Flows

The US Dollar is rebounding as global risk sentiment weakens. The USD/JPY pair is rising steadily as investors favour the Greenback. A stronger US Dollar reflects risk-off flows and shifting expectations for Fed rates.

The Dollar Index trades near 97.30, showing signs of recovery. Markets now see fewer chances of near-term Fed rate cuts. This shift adds momentum to the upward move of USD/JPY.

Trade tensions are boosting demand for safe-haven assets. As the July 9 tariff deadline nears, investors reduce their exposure to risk currencies. The Japanese Yen also gains some support, but not enough to offset the strength of the Dollar.

Overall, USD/JPY is likely to continue rising if the Dollar rally extends. These trends will depend on Fed signals and global trade developments.

AUD/USD Technical Analysis – Ascending Broadening Wedge Pattern

The 4-hour chart for AUD/USD shows that the price is consolidating within an ascending broadening wedge pattern. As the USD Index rebounds, AUD/USD is correcting at a slower pace. As long as the pair remains above 0.64, it is likely to trend upward. A break above 0.6650 could take the pair to much higher levels.

NZD/USD Technical Analysis – Bullish Price Action

The 4-hour chart for NZD/USD shows that the pair is consolidating below the 0.61 area. The formation of multiple bottoms above 0.5850, followed by a strong rebound from 0.55, indicates that the pair remains in a strong upward trend. A break above 0.61 could push the pair to much higher levels.

USD/JPY Technical Analysis – Neutral Zone

The following chart for USD/JPY shows that the pair is rebounding from the long-term support level near the 142 area. The consolidation in USD/JPY has broken out of the descending broadening wedge pattern, which is a bullish signal. A break above the 151 level would clear key resistance and likely initiate a strong upward trend in the USD/JPY pair.