AUD/USD, NZD/USD, USD/JPY Analysis: RBA Rate Cut & BoJ Policy Impact

Market Reactions to RBA’s Monetary Policy Decision

The Reserve Bank of Australia (RBA) cut the interest rate by 25 basis points for the first time in four years, which weakened the Australian Dollar (AUD) against the US Dollar (USD). A 25 basis points (bps) cut was already priced into the market. However, the volatility increased after the interest rate decision, pushing AUD higher and hitting the $0.6370 resistance.

Australia’s unemployment rate has risen to 4%, as shown in the chart below, creating uncertainty about future rate cuts. A tight labour market can sustain wage growth and inflation, which may prevent aggressive monetary easing. The AUD could find support if the RBA acknowledges this and hints at limited rate cuts. However, if policymakers downplay labour market strength and prioritize economic slowdown concerns, the market may price in additional cuts, leading to a bearish AUD/USD outlook.

The post-announcement press conference is crucial in shaping market sentiment. Governor Michele Bullock’s tone and guidance will influence the AUD’s trajectory. A clear indication of a prolonged easing cycle could trigger a selloff, while cautious wording might cushion the AUD’s fall.

Japanese GDP Surprise and Its Impact on USD/JPY

The stronger-than-expected Japanese GDP data has boosted the Japanese Yen (JPY), causing USD/JPY to slump to 151.00. The chart below shows the quarterly and annualized growth in Japan’s GDP. This growth has increased expectations that the Bank of Japan (BoJ) may soon tighten its monetary policy.

If the BoJ signals an end to its ultra-loose policy, the Yen could strengthen further, pushing USD/JPY lower. Investors expect potential rate hikes or adjustments from the BoJ, which could lead to further declines in the currency pair.

On the other hand, the USD remains under pressure due to weak economic data and uncertainty over trade policy. The sharp drop in US Retail Sales suggests slowing consumer spending, raising concerns about economic momentum. Additionally, market participants are wary of a lack of clarity on Trump’s tariff plans, which could further impact the USD’s stability. If risk sentiment weakens or the Federal Reserve hints at a more cautious approach to rate hikes, USD/JPY may continue its downward trend. However, the pair could find temporary support if US economic data improves.

AUD/USD Analysis – Symmetrical Broadening Wedge

The AUD/USD shows the formation of a symmetrical broadening wedge pattern. The emergence of an inverted head and shoulders within this wedge indicates bullish price action. The price has hit the resistance at $0.6370 and is now consolidating back to the neckline of the inverted head and shoulders at around $0.6305. This price correction offers another buying opportunity toward the $0.6370 level.

NZD/USD Analysis – Inverted Head & Shoulders

The NZD/USD also consolidates within the symmetrical broadening wedge pattern and shows bullish price action within the wedge. A few pips missed the $0.5760 target, but the overall trend remains upward. The price correction in NZD/USD may offer another buying opportunity toward the $0.5760 zone.

USD/JPY Analysis – Descending Channel

The 4-hour chart for USD/JPY shows that the pair trades within a descending channel and tests the $151 support for the second time. The pair rebounds higher after hitting this support. The strong support levels are $151 and $150, where the next move in USD/JPY will likely develop. The RSI has entered the oversold region, indicating a potential rebound from these levels.