AUD/USD and NZD/USD Face Resistance, USD/JPY Remains Under Pressure

AUD/USD Pressured by Inflation Concerns and Trade Uncertainty

The AUD/USD pair weakens as investors remain cautious ahead of Australia’s monthly inflation report. The RBA’s recent hawkish rate cut signals a complex policy stance, making inflation data crucial for future rate decisions. Rising risk aversion weighs on the Australian dollar, especially after Trump’s renewed push for Canadian and Mexican import tariffs. This policy shift could disrupt global trade and weaken market sentiment, further pressuring the Australian Dollar. Additionally, concerns over China’s property market, despite government intervention, add to uncertainty. While China’s rural revitalization plans support the Australian economy, the broader outlook remains fragile.

Moreover, Australia’s labour market data adds another layer of complexity for AUD/USD traders. The chart below shows Australia’s unemployment rate and the employment-to-population ratio. The unemployment rate is 4.1%, while the employment-to-population ratio has surged to 65.09%. This suggests a strong labour market with increasing workforce participation, particularly among young workers.

Higher employment among young people indicates a robust economy with strong job creation. The rising participation rate explains why unemployment remains stable despite more people entering the workforce. However, if wage growth slows, it may signal a weakening demand for labour. The trend suggests that the Reserve Bank of Australia (RBA) might hold off on further rate hikes as inflationary pressure from wages could ease.

USD/JPY Under Pressure Amid BoJ Tightening and Fed Rate Cut Bets

The USD/JPY pair faces mixed pressures as investors weigh the Bank of Japan’s bond market actions and the Federal Reserve’s shifting rate expectations. The decline in 10-year Japanese Government Bond (JGB) yields suggests stronger demand for bonds, which could limit gains in the yen. However, the yen supports expectations of further BoJ rate hikes. Hotter-than-expected inflation in Japan strengthens the case for monetary tightening, which could reduce the policy gap between the BoJ and the Fed. If the BoJ signals more rate hikes, the yen may gain further against the dollar, putting downward pressure on the USD/JPY.

On the other hand, the US dollar has rebounded after a steep drop, but weaker economic data raises concerns about slowing growth. The sharp decline in US PMI data fuels expectations of Fed rate cuts, increasing the likelihood of a June policy shift. If the Fed turns dovish while the BoJ continues tightening, USD/JPY may face more downside pressure. However, if risk sentiment worsens, the dollar could find safe-haven demand, limiting yen gains.

AUD/USD Technical Analysis – Symmetrical Broadening Wedge

The 4-hour chart for AUD/USD shows the formation of a symmetrical broadening wedge pattern, indicating strong volatility. The price has reached a key short-term resistance at $0.64, aligning with the upper boundary of the wedge. However, the emergence of an inverted head and shoulders pattern within the wedge suggests a strong bullish setup. The price is currently correcting toward the neckline of this pattern, around $0.63, which could lead to another upward move. Meanwhile, the RSI has broken below the mid-level, signalling the potential for further price correction before a possible rebound.

NZD/USD Technical Analysis – Inverted Head and Shoulders

The NZD/USD has hit resistance at $0.5770 and corrected lower. The RSI has broken below the mid-level, suggesting that the pair may continue to correct before the next move higher. The formation of an inverted head and shoulders pattern indicates that the pair may find support once the correction is complete. The overall trend remains upward.

USD/JPY Technical Analysis – Descending Channel

The USD/JPY remains in a strong downward trend as the US dollar weakens and the Japanese yen strengthens. The pair has reached the support region at $149.20, aligned with the descending channel’s support. However, the trend remains bearish, and any rebound in USD/JPY may lead to another decline in the pair.