AUD/USD, NZD/USD, USD/JPY Analysis: Australian Dollar Struggles, Yen Gains on BOJ Policy

Australian Dollar Faces Volatility After RBA Rate Cut

The Reserve Bank of Australia’s (RBA) rate cut has created uncertainty for the Australian dollar. The chart below shows that the RBA lowered its cash rate target by 25 basis points, marking the first rate cut in four years.

The decision to cut interest rates was due to lower inflation. As inflation slowed, the Trimmed Mean inflation rate fell to 3.2%, and the overall inflation rate dropped to 2.4%, as shown in the chart below.

On the other hand, the chart shows that the CPI of services has not declined as much as the overall inflation rate.

The RBA rate cut decision indicates economic weakness. However, the central bank has lowered its GDP growth forecast from 1.5% to 1.1%. These factors have led to a vulnerability in AUD/USD. Moreover, the RBA warned that deep rate cuts are unlikely, limiting further downside for the Australian dollar. However, rate differentials still favor the US dollar, as the Federal Reserve has not yet shifted to an easing cycle. With US interest rates remaining high, the yield gap between Australia and the US continues to widen. This makes the Australian dollar less attractive to investors, leading to further downside risks for AUD/USD.

However, from a technical perspective, AUD/USD rebounds from the long-term support region, making the pair vulnerable to further gains. If inflation continues to decline and GDP growth remains weak, the RBA may be forced to cut rates further, increasing selling pressure on the Australian dollar. Conversely, if the US economy remains strong and the Federal Reserve keeps rates steady, the USD will maintain its strength. As a result, AUD/USD may face vulnerability if the RBA signals more rate cuts in the coming months. In the short term, AUD/USD is looking for a strong rebound from technical support and is likely to gain strength.

Japanese Yen Strengthens as BoJ Tightening Narrows Rate Gap

The Japanese yen strengthens as rising Japanese Government Bond (JGB) yields attract investors. The Bank of Japan’s (BoJ) hawkish stance has pushed the yield on the benchmark 10-year JGB to its highest level since November 2009. This has narrowed the rate differential between Japan and other major economies, increasing demand for the yen. As a result, USD/JPY has dropped to the mid-150.00s, its lowest level since December 9. The currency pair has also confirmed a breakdown below the 151.00 mark, signaling further downside potential. Japan’s Q4 GDP data also came in strong, reinforcing expectations of another BoJ rate hike, which continues to support the yen.

On the other hand, the weakness of the US dollar contributes to the decline of the USD/JPY. Despite hawkish Federal Reserve minutes and statements from key Fed officials, the dollar struggles to gain traction. Concerns over US President Donald Trump’s tariff threats have further fueled risk aversion, increasing demand for the safe-haven yen. Japan’s Trade Minister, Yoji Muto, plans to meet US officials in March to request exemptions from potential tariffs on steel and automobiles. If risk-off sentiment persists and BoJ tightening expectations remain firm, USD/JPY may continue its downward trajectory.

AUD/USD Analysis – Bullish Continuation

The AUD/USD shows strong volatility within the ascending broadening wedge pattern. The pair forms an inverted head and shoulders pattern within the wedge, and the price consolidates at its edge. This consolidation indicates a bullish continuation and a break above $0.6370 will open the door for a strong rally in AUD/USD.

NZD/USD Analysis – Inverted Head and Shoulders

The NZD/USD shows the formation of an inverted head and shoulders pattern, indicating bullish price action. The pattern’s formation within the long-term support region suggests that NZD/USD may continue to trade higher. The pair is heading toward $0.5770, and a break above this level could push it to higher levels. The RSI rebounds from the mid-level, signaling buying potential in NZD/USD.

USD/JPY Analysis – Descending Channel

The 4-hour chart for USD/JPY shows the formation of a descending channel, with the price moving toward the support of this channel at $149.70. The RSI indicates that the pair is approaching oversold levels, where support is $149.70. A rebound from this level may lead to another decline. The overall direction for USD/JPY remains downward.