AUD/USD, NZD/USD, and USD/JPY Analysis: Trade Tensions, Rate Policies, and Technical Setups

Australian Dollar Faces Pressure Amid Weak Data and Trade Tensions

The Australian Dollar (AUD) weakened for the fourth straight session. AUD/USD extended losses after weak private capital expenditure data. The chart below shows disappointing Q1 performance, hurting confidence in Australia’s economy.

Meanwhile, the US Dollar (USD) strengthened after a US court blocked Trump’s “Liberation Day” tariffs. This legal setback reduced near-term trade tension, favoring the Greenback.

China’s export restrictions also pressured the AUD. The US responded by halting sales of semiconductors and chemicals to China. As Australia relies heavily on trade with China, such tensions negatively affect the AUD’s outlook. Meanwhile, China’s industrial profits rose 3% year-over-year in April, signaling economic resilience. However, this strength may prompt more aggressive US trade measures, which could further weigh on the AUD.

The Reserve Bank of Australia (RBA) maintained a dovish stance. The central bank acknowledged progress in controlling inflation but warned of trade-related downside risks. Governor Michele Bullock stated that rate cuts remain an option if the economic outlook deteriorates.

These expectations continue to weigh on the AUD, with investors pricing in future policy easing. Additionally, April’s inflation remains slightly above expectations at 2.4% year-over-year, which may delay immediate action but does not alter the broader bearish sentiment.

US Dollar Gains Support on Fiscal Outlook and Rate Stability

The US Dollar Index (DXY) rebounds to 100.40 on Thursday. The market is waiting for US Q1 GDP, personal consumption expenditures, and jobless claims. These indicators will shape expectations for economic strength and monetary policy. Meanwhile, FOMC minutes show the Fed prefers to hold rates steady amid uncertainty. This supports the USD by reinforcing the central bank’s cautious stance.

Moreover, Trump’s proposed “One Big Beautiful Bill” could increase the deficit by $3.8 billion. The CBO projects a significant widening of the fiscal gap. Senator Ron Johnson raised concerns, warning of a $2.2 trillion annual deficit. Rising deficits often push bond yields higher, which attracts foreign capital and strengthens the USD.

On the other hand, Moody’s downgraded the US credit rating from Aaa to Aa1, citing debt projections reaching 134% of GDP by 2035. Despite the downgrade, higher borrowing costs can make US assets more attractive. This supports USD strength against low-yield currencies like JPY and AUD. However, Trump’s delay of tariffs on EU goods to July 9 boosted global equities and briefly softened the USD.

However, the JPY lost ground as USD/JPY rebounded from 140. The pair advanced toward 148.30, a key resistance level. The US fiscal outlook and elevated bond yields reduce the appeal of the JPY. Overall, while trade tensions fluctuate, USD strength and interest rate stability dominate. This keeps AUD/USD under pressure and supports upward momentum in USD/JPY.

AUD/USD Technical Analysis – Ascending Broadening Wedge Pattern

The 4-hour chart for AUD/USD shows that the pair is trading within an ascending broadening wedge pattern. It is consolidating around the $0.6400 area. A break below this level may lead to further downside toward $0.6320. However, a rebound could push the price toward $0.6570, which is near the long-term resistance line. The recent strength in the US Dollar Index is contributing to the decline in AUD/USD.

NZD/USD Technical Analysis – Positive Consolidation

The 4-hour chart for NZD/USD shows that the price is consolidating between the $0.5850 and $0.6020 levels. This consolidation reflects strong bullish price action, and a break above $0.6020 would signal further upside. The sharp volatility following Trump’s tariff announcement has generated positive momentum in NZD/USD.

USD/JPY Technical Analysis – Descending Broadening Wedge

The 4-hour chart for USD/JPY shows that the pair is trading within a descending broadening wedge pattern. The failure to break below 140 has led to a strong rebound toward 148.30. Key resistance levels remain at 148.30 and 151. A break above 151 would signal a strong and sustained move to the upside.