AUD/USD, NZD/USD, and USD/JPY Analysis: Powell’s Policy Uncertainty Drives Dollar Volatility

AUD/USD Strengthens on US Dollar Weakness and China’s Economic Momentum

The AUD/USD pair continues its upward momentum as investor sentiment weakened due to renewed uncertainty over the Federal Reserve’s policy direction. Market concerns increased after White House advisor Kevin Hassett indicated that legal options are being explored regarding Chair Jerome Powell’s position. This added pressure raised doubts about the Fed’s independence and stability. As a result, the US dollar came under pressure, supporting gains in the Australian dollar.

Meanwhile, US economic data remains weak, adding to the downside momentum in the US dollar. The chart below shows that inflation dropped to 2.4% year-over-year in March, down from 2.8% in February and below the forecast of 2.6%.

On the other hand, the core inflation rate also dropped to 2.8%, missing expectations of 3.0%. This decline and calls for lower interest rates have raised concerns about stagflation. Uncertainty increased further after Powell warned that persistent inflation could harm economic stability.

Moreover, initial jobless claims dropped to 215,000, highlighting a still fragile labour market.

Australia’s mixed data did little to offset the US dollar’s weakness. The chart below shows that the unemployment rate in Australia rose to 4.1%, while employment change came in at 32.2K, below the expected 40 K. However, the RBA minutes indicated no immediate policy shift, with the May meeting seen as a review point. This neutral stance and a stable outlook in China supported the Australian dollar.

China’s stronger-than-expected economic data further supported the Australian dollar. The chart below shows that China’s GDP increased by 5.4% in Q1 2025.

On the other hand, China’s retail sales increased to 5.9%, and industrial production surged by 7.7%. These strong figures support Australia’s export outlook and help stabilise sentiment in the Asia-Pacific region. The Chinese recovery provided tailwinds to AUD/USD despite Australia’s weaker employment data.

USD/JPY Pressured by Safe-Haven Flows and Fed Uncertainty

On the other hand, USD/JPY remained under pressure due to overall dollar weakness and renewed safe-haven demand for the Japanese yen. Market volatility has increased amid ongoing uncertainty, prompting investors to move toward the yen. The jobless claims and falling CPI reflect a slower economic outlook. This aligns with Powell’s concerns and increases the likelihood of rate cuts, which could further weigh on USD/JPY. The pair may test lower levels if uncertainty around the Fed persists and global risk sentiment stays fragile.

AUD/USD Technical Analysis – Key Resistance of $0.65

The 4-hour chart for AUD/USD shows that the pair has formed a strong bullish price structure. It has broken above $0.6390 and appears to be heading toward $0.65. A break above $0.65 would indicate a strong rally in the pair. The ongoing strength in the gold (XAU) market and continued pressure on the US dollar support the possibility of further upside in AUD/USD.

NZD/USD Technical Analysis – Breakout

Due to its strong correlation with AUD/USD, NZD/USD also trades positively. The pair has broken out of a symmetrical broadening wedge pattern at $0.5880 and continues to move higher with strong bullish momentum. The bearish pressure on the US Dollar Index supports the rally in NZD/USD and indicates further upside potential.

USD/JPY Technical Analysis – Descending Broadening Wedge

The 4-hour chart for USD/JPY shows strong bearish pressure, driven by weakness in the US dollar and increased safe-haven demand for the Japanese yen. The pair has reached the long-term pivotal level at 140 but remains weak. A break below 140 could trigger a sharp decline, while a recovery above 149 would neutralise the downward trend. Based on current market conditions, a recovery above 149 appears unlikely.