AUD/USD, NZD/USD Gain Momentum While USD/JPY Awaits Direction

Australian Dollar Strengthens Amid US Dollar Weakness

The Australian Dollar continues to strengthen as the US Dollar faces pressure from trade uncertainties and economic concerns. Despite a decline in Australia’s Consumer Inflation Expectations to 3.6% in March from 4.6% in February, AUD/USD remains strong. This suggests that traders prioritize external factors, such as the cooling US inflation data, which increases speculation of a potential Federal Reserve rate cut. The lower inflation in the US reduces the likelihood of aggressive monetary tightening, supporting the Australian Dollar’s bullish momentum.

Moreover, the trade policies also influence the AUD/USD movement. The US government confirmed a 25% tariff on imported steel and aluminium, affecting Australia’s key exports valued at nearly $1 billion. However, Australian Prime Minister Anthony Albanese ruled out retaliatory measures, emphasizing the need to avoid inflationary pressures at home. Meanwhile, Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser highlighted the impact of global trade disruptions, noting that prolonged uncertainty could weigh on economic activity. If trade tensions persist, investors may shift focus to Australia’s domestic economic resilience as a factor in currency valuation.

On the other hand, the US Dollar Index trades around 103.50 as investors assess the impact of slowing inflation and trade disputes. US headline inflation eased to 0.2% in February from 0.5% in January, as shown in the chart below.

Moreover, yearly inflation moderated to 2.8% from 3.0%, with core inflation at 3.1% from 3.3%. China’s recent announcement of 100% tariffs on certain Canadian exports introduces new risks to global trade. These developments contribute to volatility, potentially strengthening demand for risk-sensitive currencies like the Australian Dollar.

Impact of US Inflation on the USD/JPY Movement

USD/JPY rebounded to 149.20 during North American trading hours on Wednesday as the US Dollar rebounds. The US Dollar Index moves to 103.75 after hitting a four-month low of 103.20 on Tuesday. This increase comes despite the softer-than-expected US CPI report for February. The lower inflation interest rate cut expectations in May may limit further upside in USD/JPY.

Despite this, the Japanese Yen underperforms as major Japanese firms agree to strong wage hikes for the third consecutive year. Higher wages could lift inflation expectations, prompting the Bank of Japan to consider tightening monetary policy further. However, the US Dollar’s recent rebound is partially driven by concerns over US President Donald Trump’s tariff plans, which could slow economic growth. If tariffs weaken household purchasing power, the US Dollar may face renewed pressure, creating downside risks for USD/JPY.

AUD/USD Technical Analysis – Bullish Momentum

The 4-hour chart for AUD/USD shows that the pair is forming a bullish price action and appears poised for an upside move. The strength in gold (XAU) prices following the release of CPI data further supports the bullish outlook for the Australian dollar, keeping AUD/USD on an upward trajectory. The target for AUD/USD remains the symmetrical broadening wedge pattern resistance line at $0.6440.

NZD/USD Technical Analysis – Broadening Wedge Pattern

The 4-hour chart for NZD/USD shows that the pair has formed strong bullish price action and has broken the black trend lines. The pair is trading above this level and remains in a bullish stance. The chart displays three red arrows, confirming the inverted head and shoulders pattern and indicating a potential move toward the $0.58 resistance area.

USD/JPY Technical Analysis – Descending Channel

USD/JPY rebounded from the descending channel’s support at $147 but still looks bearish. The strong resistance remains at $150.50; a break above this level could push the pair toward $152. A break below $147 would indicate further downside in USD/JPY. The rebound in USD/JPY is linked to support in the US Dollar Index at 103.50. A break below 103.50 in the US Dollar Index could lower the USD/JPY.