AUD/USD, NZD/USD, USD/JPY React to Fed Pause and Easing Trade Tensions

The US dollar gained momentum after the Federal Reserve left interest rates unchanged and Chair Jerome Powell reiterated a cautious stance on easing. The Fed’s decision reinforced confidence in the dollar, as Powell gave no clear timeline for rate cuts.

The dollar index hovered near a two-month high at 99.987 and remained steady at 99.77. It is on track for a monthly gain of over 3%, marking its first positive month in 2025. The strong US economic data and reduced tariff uncertainty helped support the greenback.

Investors scaled back expectations for rate cuts, now pricing in just 35 basis points of easing by December. Powell’s tone signalled resilience in the US economy and discouraged immediate policy loosening. This shift in expectations boosted front-end yields and demand for the dollar.

Trade policy developments also lifted the US dollar. Recent deals with Japan, the EU, and South Korea reduced global trade risks. Meanwhile, Trump’s 15% tariff on South Korea and a 50% tariff on Brazilian imports suggested Washington retains leverage, reinforcing bullish sentiment for the dollar.

Consumer confidence rose to 97.2 in July, while expectations increased to 74.4. Although still below the key 80 threshold, the data showed moderate optimism. The more substantial confidence typically supports spending and helps maintain a stable currency outlook.

Fed Pause and Trade Shifts Drive Dollar Strength Across Markets

USD/JPY extended its gains, supported by rising US yields and a strengthening dollar. The pair broke above 148.30. A confirmed breakout above 151 could send USD/JPY toward 153. The short-term inverted head and shoulders pattern signals bullish momentum.

The weaker euro and pound added fuel to the dollar’s strength. The euro slipped 3% in July, last trading near $1.1422. Sterling fell to $1.3248, down 3.5% for the month. Both currencies struggled against the backdrop of US rate stability and growth resilience.

In equities, US stock indexes lost steam as higher yields dampened sentiment. The Dow Jones 30 dropped 0.4%, while the S&P 500 dipped slightly. Traders shifted focus from risk assets to the US dollar, driving further strength in the greenback.

AUD/USD Technical Analysis – Ascending Broadening Wedge Pattern

The 4-hour chart for AUD/USD shows that the pair has been trading within an ascending broadening wedge. The recent rally in the US Dollar Index has pushed the pair down toward key support level at 0.6440, near the lower boundary of the wedge. A break below 0.6420 could trigger a sharp decline toward the 0.6380 and 0.6320 levels. However, the RSI has reached oversold territory, suggesting a potential short-term rebound from the 0.6440 area.

NZD/USD Technical Analysis – Consolidation

The 4-hour chart for NZD/USD shows that the pair has reached strong support at 0.5870 and initiated a solid rebound from this level. The overall structure remains bullish as long as the 0.5870 support holds. This bullish setup stems from a strong rebound off the long-term support near 0.5500.

A breakout above 0.6150 is needed to confirm a sustained upside move. However, the recent rebound appears driven by oversold market conditions, as indicated by the RSI. If the US dollar continues to rally, NZD/USD may break below 0.5870 and resume its downward momentum.

USD/JPY Technical Analysis – Neutral Zone

The 4-hour chart for USD/JPY shows that the pair has broken above 148.30 and is approaching the 151 level, supported by continued strength in the US Dollar Index. However, a confirmed break above 151 is needed for the pair to extend its upside. The formation of an inverted head and shoulders pattern in the short term suggests building positive momentum within a neutral zone. Despite this, the pair remains in consolidation and has yet to confirm a decisive breakout.