AUD and NZD Show Signs of Recovery – USD/JPY Caught in Wedge Before CPI Release

Trade Tensions and Chinese Slowdown Weigh on AUD/USD Outlook

The Australian Dollar (AUD) dropped against the US Dollar following renewed trade tensions between the US and China. President Trump raised tariffs on Chinese imports to 104%, triggering fears of further economic fallout. Given Australia’s strong trade ties with China, this move negatively impacted AUD sentiment. The AUD/USD pair remains volatile as the market digests the tariff news.

On the other hand, China responded by increasing tariffs on US imports to 84% and blacklisting six American firms. It also imposed export controls on companies like American Photonics and BRINC Drones. This escalation raised concerns about reduced Chinese demand for Australian goods. Moreover, China’s Consumer Price Index (CPI) fell 0.1% in March after a 0.7% drop in February, missing expectations. On the other hand, the Producer Price Index (PPI) also declined 2.5% year-over-year, deepening from February’s 2.2% fall.

Weak Chinese inflation data signals a slowdown in economic activity. Since China is Australia’s largest trading partner, any slump in Chinese demand tends to weaken the AUD. The fall in CPI and PPI highlights soft domestic conditions in China, amplifying concerns over Australia’s export-dependent economy. Market participants view these signs as pressure points for further downside in the AUD/USD pair.

However, after a strong correction last week, safe-haven demand for gold (XAU) is pushing prices near record levels. This strength in the gold market helps support the AUD. The negative outlook for the AUD is partially offset by rising gold demand, keeping the AUD/USD pair volatile.

Falling Consumer and Business Confidence Puts Pressure on the Australian Dollar

Australia’s economic indicators also show weakness. As shown in the chart below, Australian Consumer Confidence dropped 6% in April, reversing a 4% gain in March.

On the other hand, the business confidence slipped to -3 in March, its lowest since November, as shown in the chart below. These figures suggest declining domestic sentiment. As a result, markets expect the Reserve Bank of Australia (RBA) to cut rates by up to 100 basis points this year, starting in May.

Meanwhile, the US dollar index remains under bearish pressure below 103.50. However, the US Dollar benefits from its safe-haven appeal during periods of global uncertainty. While President Trump paused new tariffs for most partners and lowered them to 10%, the focus remains on US inflation data and Fed policy. The FOMC minutes showed concerns about balancing inflation and growth, yet the chance of a rate cut remains low at 40%. In contrast, Australia’s fragile outlook continues to weigh on the AUD, likely keeping the AUD/USD pair under pressure.

AUD/USD Technical Analysis – Volatility

The 4-hour chart for AUD/USD shows the formation of a symmetrical broadening wedge pattern, with the price rebounding from its support. The strong rebound from this level reflects high volatility and suggests potential for further upside. This move was driven by oversold conditions, adding to the bullish bias. A break above $0.6450 is needed for AUD/USD to initiate a strong rally.

NZD/USD Technical Analysis – Volatility

The 4-hour chart for NZD/USD shows that the pair is trading within a symmetrical broadening wedge pattern. It has rebounded from the long-term support at $0.55 and shows positive momentum, suggesting that the pair may continue to move to the upside.

USD/JPY Technical Analysis – Falling Wedge

The 4-hour chart for USD/JPY shows that the pair is trading within a falling wedge pattern and is seeking its next direction. The price is currently range-bound between $141 and $149.50, which marks the boundaries of the pattern. The upcoming inflation data release on Thursday is expected to provide further direction for USD/JPY.