AUD/USD and NZD/USD Rally on Ceasefire and US Dollar Weakness, USD/JPY Near Breakdown

AUD/USD Gains on Ceasefire and Dovish Fed Expectations

The Australian Dollar (AUD) rose against the US Dollar (USD) this week. Risk-on sentiment returned after the ceasefire between Israel and Iran. This eased global tensions and supported commodity-linked currencies, such as the AUD.

AUD/USD climbed above 0.6500, breaking the 200-day SMA. This technical breakout attracted more buyers, although the momentum has slowed. Traders are now reassessing inflation and rate expectations in both economies.

Australia’s latest Monthly CPI data showed cooling inflation. Annual inflation came in at 2.1% in May, below the expected 2.3%. This raised expectations that the Reserve Bank of Australia (RBA) might cut rates in July. The chart below shows that the drop in inflation followed three consecutive months of stable CPI figures.

Despite this dovish RBA outlook, the AUD remained firm. This was due to broad US Dollar weakness driven by expectations of Fed policy. Traders now see up to 62 basis points of Fed rate cuts by year-end.

Fed Chair Jerome Powell reiterated that tariffs could delay further interest rate cuts. However, his tone still appeared dovish compared to the prior week. Markets interpreted his remarks as laying the groundwork for a September rate cut.

This shift has kept pressure on the US Dollar, benefiting the AUD. However, the rally may stall if Australian inflation stays soft and risk sentiment fades. AUD/USD remains supported above 0.6500. However, it needs a strong catalyst, either in Fed policy or RBA action, to extend gains toward 0.6600 and beyond.

USD/JPY Struggles as Dollar Strength Weakens

USD/JPY is showing signs of weakness after failing to hold gains above 148.30. The pair faced strong resistance as market sentiment shifted following Powell’s testimony and easing global tensions.

The breakout from the descending broadening wedge failed to sustain. Traders saw this as a signal of weakening bullish momentum in USD/JPY. The pair is now hovering near key support levels.

The Fed’s dovish tilt has capped the strength of the US dollar. Markets now fully price in a rate cut by September. This outlook has weakened the dollar’s appeal, especially against currencies backed by hawkish central banks.

Japan’s economic data has been mixed, but the yen gained as safe-haven demand eased. The ceasefire between Iran and Israel reduced risk premiums, prompting investors to return to low-yield currencies like the yen.

US Treasury yields also declined after Powell’s remarks. Lower yields reduce interest rate differentials, making the USD less attractive compared to the JPY.

If USD/JPY breaks below 142, the bearish trend could accelerate. Technical indicators also show rising downside pressure in the pair. In the short term, USD/JPY may remain range-bound. But continued US data weakness or further dovish Fed signals could trigger a sharp decline.

AUD/USD Technical Analysis – Ascending Broadening Wedge Pattern

The 4-hour chart for AUD/USD shows that the pair has found strong support around the 0.64 level after the US Dollar continued to weaken. The bearish pressure on the Dollar Index is pushing AUD/USD higher toward the 0.66 area. A break above 0.66 could lead to further upside in the pair.

The emergence of an ascending broadening wedge within a larger symmetrical broadening wedge indicates a high level of volatility. However, the bullish trend inside the symmetrical wedge suggests an upside breakout is likely.

NZD/USD Technical Analysis – Bullish Price Action

The 4-hour chart for NZD/USD shows that the pair is forming strong bullish price action. It has found solid support at 0.5850 and has started a positive move toward the 0.6090 level. A break above 0.6090 could trigger a strong rally in NZD/USD. The continued bearish pressure on the US Dollar Index is supporting this upward momentum and is likely to push the pair higher.

USD/JPY Technical Analysis – Descending Broadening Wedge

The 4-hour chart for USD/JPY shows that the pair has found strong resistance at 148.30. The breakout from the descending broadening wedge pattern failed near this level, indicating that bearish pressure is likely to persist. A break below 142 could initiate the next downward trend in the USD/JPY. The strong bearish momentum suggests a possible downside breakout in the pair.