AUD/USD, NZD/USD, and USD/JPY Analysis: Rate Cut Bets and Trade Tensions Drive Volatility

AUD/USD Weakens as RBA Rate Cut Bets and Trade Tensions Weigh on Sentiment

The Australian Dollar is showing short-term price weakness as markets anticipate a 25-basis-point rate cut from the Reserve Bank of Australia (RBA) at its meeting on May 20. Despite this price weakness, the price structure remains constructive after a rebound from $0.5910. The inflation data for Australia this week will further drive the direction for this pair. The chart below indicates that inflation expectations in Australia have increased to 4.2% in April 2025. The pair has already slipped after hitting the resistance of $0.6450 and suggests that the pair may correct in the short term to stabilize for the next direction.

Moreover, trade tensions between the US and China continue to influence the direction of AUD/USD. President Trump hinted at reducing tariffs, and Beijing exempted some US goods from 125% levies, offering temporary relief. However, Chinese officials denied any active negotiations, creating confusion and weighing on risk sentiment. A prolonged lack of resolution could increase volatility in AUD/USD as investors flee risk-sensitive currencies like the Australian Dollar.

USD/JPY Struggles Amid Trade Uncertainty and Safe-Haven Yen Strength

Meanwhile, USD/JPY sees mixed reactions as trade policy uncertainty impacts the US Dollar’s appeal. The US Dollar Index (DXY) trades around 99.00, but Trump’s erratic tariff announcements erode investor confidence. Despite higher US dollar readings, USD/JPY struggles to build strong upward momentum and faces resistance near the 144.00 level. If trade tensions escalate again, safe-haven flows could boost the Japanese Yen and push USD/JPY back toward 142.00.

China’s Finance Ministry warned that tariffs threaten global economic stability, adding pressure on AUD/USD and USD/JPY. Sluggish growth could hit Australian exports and further depress the AUD. At the same time, growing fears of a broader slowdown could strengthen the Yen as a safe-haven asset. The market is waiting for China’s data and US reports to gauge the next move in these pairs. The release of Nonfarm payroll on Friday will be the key event for these markets.

AUD/USD Technical Analysis – Bullish Price Development

The 4-hour chart for AUD/USD shows that the price has been trading within a symmetrical broadening wedge pattern since early 2025. The consolidation within this wedge forms a strong bullish price structure, where a break above $0.6450 could initiate a strong surge higher. Moreover, a break above $0.6500 would likely trigger a long-term bullish rally. The RSI is consolidating above the mid-level, indicating a positive trend.

NZD/USD Technical Analysis – Ascending Broadening Wedge

The 4-hour chart for NZD/USD shows that the price has broken above the symmetrical broadening wedge pattern at $0.5880 and has entered an ascending broadening wedge pattern. The price is consolidating within this wedge, showing strong volatility. Since the price has rebounded from the long-term support at $0.55 and broken above $0.5880, the trend is likely to continue increasing.

USD/JPY Technical Analysis – Descending Broadening Wedge

The 4-hour chart for USD/JPY indicates that the price is trading within a descending broadening wedge pattern, exhibiting strong volatility around the long-term support level. The 140 level marks a critical long-term support area, where a break below it would continue the bearish trend. The price has failed to break below 140, indicating a rebound from this level. However, the failure to break above 144 suggests that the overall trend remains negative.