AUD and NZD Rebound While USD/JPY Awaits CPI-Driven Breakout

The currency markets are showing early signs of a turnaround, with the Australian Dollar (AUD) and New Zealand Dollar (NZD) rebounding from critical support levels, while USD/JPY traders wait cautiously for key inflation data. Amid geopolitical strains, economic uncertainty, and shifting technical patterns, the FX landscape is setting up for potential volatility across these major pairs.

AUD/USD: Trade Tensions, China’s Slowdown, and Gold’s Support

The Australian Dollar has been under pressure following renewed U.S.-China trade tensions. After the United States increased tariffs on Chinese imports to 104%, China retaliated sharply with 84% tariffs on U.S. goods and blacklisted several American firms. For Australia, whose economy is deeply intertwined with China’s demand for commodities, these developments raise serious concerns.

Adding to the negative sentiment, China’s inflation data missed forecasts. March’s Consumer Price Index (CPI) dipped by 0.1%, following February’s steeper 0.7% fall. At the same time, China’s Producer Price Index (PPI) dropped further, declining 2.5% year-on-year, deeper than the previous 2.2% fall. These numbers confirm a deceleration in China’s domestic demand, directly impacting Australia’s export outlook.

However, despite these headwinds, the AUD has found some relief. Gold prices have surged towards record levels amid global uncertainty, offering indirect support for the AUD. Australia is a major gold exporter, and rising gold demand has tempered some of the downside pressure on the Australian Dollar.

Compounding concerns for AUD are weak domestic indicators. Consumer confidence plunged 6% in April, reversing gains from the previous month. Business confidence also slipped to -3 in March, marking the lowest reading since late 2023. These soft readings point toward deteriorating domestic sentiment, prompting market speculation that the Reserve Bank of Australia (RBA) may cut rates by as much as 100 basis points this year, possibly starting in May.

Technically, the AUD/USD 4-hour chart shows a symmetrical broadening wedge pattern. The pair has rebounded off the lower support, signaling heightened volatility. The bounce was fuelled by oversold conditions, indicating potential for a further move higher. A decisive break above $0.6450 could open the door for a stronger bullish extension.

NZD/USD: Rebound from Long-Term Support

The New Zealand Dollar is displaying similar recovery traits. NZD/USD has bounced from the long-standing support level at $0.55, benefiting from positive momentum following oversold signals. Technically, the pair is trading within a broadening wedge pattern on the 4-hour chart, and buyers are defending the support line effectively.

While New Zealand’s domestic economic data has been relatively muted, its trade ties with China mean it shares similar vulnerabilities with the Australian Dollar. Nonetheless, the technical rebound and supportive global risk sentiment suggest potential for continued upside, at least in the near term.

For bulls, sustained momentum above key resistance levels could solidify the recovery, while sellers remain watchful for any fresh deterioration in Chinese economic conditions that might weigh on NZD prospects.

USD/JPY: Caught in a Wedge, Awaiting CPI

In contrast to the AUD and NZD, the USD/JPY pair remains in consolidation mode, caught within a falling wedge pattern. The pair is currently range-bound between $141 and $149.50, as traders await the crucial U.S. CPI data release, which is expected to provide a much-needed directional trigger.

The Dollar Index (DXY) has been soft, struggling below the 103.50 mark, reflecting broader market caution. Despite this, the U.S. Dollar retains its safe-haven appeal amid rising geopolitical tensions and ongoing concerns about global growth.

The upcoming CPI print is a pivotal moment for USD/JPY. The Federal Open Market Committee (FOMC) minutes revealed a careful balancing act between inflation risks and growth concerns. Markets currently price the probability of a rate cut at just 40%, but stronger-than-expected inflation data could push those odds lower, strengthening the Dollar and potentially leading USD/JPY to test the upper boundary of its current range.

Conversely, a softer CPI report could revive expectations of policy easing, pressuring the Dollar and driving USD/JPY toward the lower end of its wedge.

Technical analysis highlights that a breakout from the falling wedge pattern could lead to a decisive move. Traders are advised to watch for a confirmed close outside the range, as this could signal the next significant leg for the pair.

Global Market Sentiment: A Delicate Balance

Overall, the currency markets are finely poised. AUD and NZD are showing tentative recovery signals, supported by technical rebounds and commodity market dynamics, despite clear fundamental challenges from China’s slowdown and local economic softness.

USD/JPY, meanwhile, is in a holding pattern, with traders reluctant to take significant positions ahead of high-impact inflation data. As the CPI release approaches, volatility is expected to rise, not just for USD/JPY but potentially across broader FX markets.

For now, traders remain on alert, ready to react to evolving trade policies, central bank signals, and economic data releases that will shape currency trends in the weeks ahead.