The Australian Dollar (AUD) weakened against the US Dollar (USD) early Tuesday, declining 0.57% after a 0.50% gain in the prior session. China’s recent rate cut by the People’s Bank of China, lowering the one-year Loan Prime Rate (LPR) from 3.10% to 3.00% and the five-year LPR from 3.60% to 3.50%, has dampened export demand expectations for Australia, a key trading partner.
Political instability further weighs on the AUD, with the National Party’s withdrawal from its coalition with the Liberal Party creating uncertainty.
The Labor Party’s strengthened mandate adds to short-term market caution, as investors typically shy away from currencies tied to political volatility.
Despite robust Australian employment data for April, showing an 89,000 job increase, markets anticipate a 25-basis-point rate cut from the Reserve Bank of Australia (RBA) in its upcoming decision.
A dovish RBA stance could further pressure the AUD, though US dollar weakness provides some support.
NZD/USD Holds Bullish Momentum
The New Zealand dollar (NZD) remains resilient, consolidating within a bullish trend despite a 0.21% dip. Strong domestic fundamentals, including steady export performance and positive economic sentiment, bolster the NZD.
Real-time data shows New Zealand’s trade balance improving, with dairy and agricultural exports driving growth. The NZD/USD pair is trading near $0.5950, supported by long-term demand zones between $0.55 and $0.56.
The US dollar’s weakness, driven by broader macroeconomic factors, continues to provide tailwinds for the pair, though global risk sentiment remains cautious amid US-China trade tensions.
USD/JPY Struggles to Break Resistance
The USD/JPY pair, down 0.31%, failed to breach the 148.30 resistance level and is now correcting lower. Despite higher US Treasury yields, the pair faces headwinds from a weakening US dollar.
Ongoing uncertainties, including potential US sanctions on Chinese firms and export restrictions, add to the bearish outlook. Japan’s economic data remains mixed, with April retail sales slightly above expectations at 5.3% year-over-year, but industrial production growth slowing to 5.8%.
These factors, combined with the DXY’s decline, keep USD/JPY under pressure, with traders eyeing key technical levels for the next move.
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US Dollar Under Strain
The US dollar’s weakness stems from multiple pressures. Moody’s recent downgrade of the US credit rating from Aaa to Aa1, citing a projected federal debt rise to 134% of GDP by 2035, has dented confidence.
The US budget deficit is expected to widen to 9%, with rising debt-servicing costs and weaker tax revenues exacerbating concerns. Recent US economic data, including softer-than-expected CPI and PPI figures and disappointing retail sales, has fueled speculation of Federal Reserve rate cuts in 2025.
These factors are creating a bearish environment for the DXY, supporting pairs like AUD/USD and NZD/USD while capping USD/JPY gains.
Additionally, escalating US-China tensions, including President Trump’s proposed tariffs and an expanded entity list targeting Chinese chipmakers, are keeping risk sentiment subdued.
Did You Know?
The Australian Dollar is often referred to as the “Aussie” in forex markets, reflecting its status as a commodity-linked currency due to Australia’s significant exports of iron ore, coal, and natural gas.
Technical Analysis: AUD/USD
On the 4-hour chart, AUD/USD is consolidating within an ascending broadening wedge, nested inside a larger symmetrical broadening wedge. The pair faces strong resistance at $0.6540, with support at $0.6370.
A breakout above or below this range will likely dictate the next significant move. Real-time market sentiment suggests traders are cautious, awaiting the RBA’s policy decision for directional cues.
Technical Analysis: NZD/USD
The NZD/USD pair exhibits bullish momentum on the 4-hour chart, consolidating around the $0.5950 level near a key trendline. The rebound of the NZD/USD pair from the $0.55-$0.56 support zone indicates that upward pressure is likely to continue.
A break above $0.60 could target higher resistance levels, provided US dollar weakness persists.
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Technical Analysis: USD/JPY
USD/JPY’s 4-hour chart reveals a descending broadening wedge, with a smaller ascending broadening wedge forming within it. The pair’s failure to break 148.30 has triggered a correction, with bearish pressure dominating.
A breakout above 148.30 could push the pair toward 151, but ongoing DXY weakness suggests downside risks remain.
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