AUD/USD and NZD/USD Gain as USD/JPY Struggles Amid Trade and Yield Uncertainty

AUD/USD Holds Firm as Trade Surplus Surpasses Expectations

AUD/USD pair remains steady after the positive Australian trade data release. The chart below shows Australia’s trade data, which expanded to 5,620 million in January, exceeding the forecast of 5,500 million and improving from the revised 4,924 million. This improvement reflects strong export growth of 1.3% month-over-month, driven by rising non-monetary gold shipments. Meanwhile, imports fell 0.3%, easing concerns about rising domestic demand pressures. The robust trade data supports the Australian Dollar (AUD) by signaling a healthier external sector, reducing fears about economic slowdowns.

On the other hand, the US Dollar remains subdued as risk sentiment improves following President Trump’s tariff strategy shift. The White House announced a one-month exemption for automakers from tariffs on Mexico and Canada, reducing fears of immediate trade disruptions. Additionally, Trump is considering excluding certain agricultural products from tariffs, signaling a softer stance on trade. This policy shift has eased global risk concerns, weakening US Dollar demand as investors shift towards higher-risk assets, including the Australian Dollar. AUD/USD gained ground on the fourth consecutive day, with the US dollar losing strength.

Despite the bullish momentum, geopolitical risks pose a downside threat to AUD/USD. A Chinese foreign ministry spokesperson warned that China is prepared to fight “any type” of war in response to Trump’s escalating trade tariffs. China is Australia’s largest trade partner. Any escalation in US-China tensions could negatively impact Australian exports. This would put pressure on the Australian Dollar. While strong trade data and Trump’s policy shift support AUD/USD, heightened trade risks with China could limit further upside.

Tariff Uncertainty, Yield Spread, and Market Sentiment Drive Volatility for USD/JPY

The USD/JPY pair remains under pressure as the Japanese Yen (JPY) shows uncertainty due to rising risk appetite and tariff concerns. US President Donald Trump hinted at possible tariffs on Japan, adding uncertainty to the trade outlook. Meanwhile, US bond yields rebounded, supporting the US Dollar and reducing demand for the safe-haven JPY. However, traders anticipate further rate hikes by the Bank of Japan (BoJ).

The narrowing US-Japan yield differential limits the USD/JPY upside. The Bank of Japan’s hawkish stance has pushed Japanese government bond (JGB) yields to their highest levels since June 2009. BoJ Deputy Governor Shinichi Uchida stated that the central bank will adjust its policy further if the economic outlook supports it. In contrast, US Treasury bond yields have fallen for six weeks. Markets fear that Trump’s trade policies could slow US growth. The weak US private sector employment data of 77K vs. 141K expected adds to these concerns. Declining consumer confidence also reinforces expectations for Federal Reserve rate cuts in 2025. This shift weakens the US Dollar and pressures the USD/JPY.

Despite these pressures, USD/JPY lacks strong bearish momentum. The US Dollar Index continues its weekly downtrend, hitting its lowest since November 6. However, US service sector activity showed unexpected strength, offering support to the US Dollar. Investors are waiting for the US Weekly Jobless Claims for short-term direction, while Friday’s US Nonfarm Payrolls report remains the key event for broader market sentiment.

AUD/USD Technical Analysis – Descending Channel

The 4-hour chart for AUD/USD shows positive price action as the pair has turned bullish after completing its correction from $0.64. The immediate target for this upward move is $0.64, where an upside breakout is likely. The emergence of a symmetrical broadening pattern indicates strong volatility, and a break above $0.6450 could trigger a strong upward move.

NZD/USD Technical Analysis – Descending Channel

NZD/USD shows similar price action by forming a symmetrical broadening wedge pattern. The pair has turned positive from the long-term support zone, as indicated by the orange zone. The immediate resistance for this bullish move is $0.58, and a break above this level will introduce further upward momentum in NZD/USD.

USD/JPY Technical Analysis – Consolidations

USD/JPY shows negative price action due to strong bearish pressure from the weaker US Dollar. However, the pair failed to break the long-term support at 148.60 and remains within the descending channel. A break below this level will introduce further downsides to the pair. On the other hand, a break above $152 could trigger an upside move.