AUD/USD, NZD/USD, and USD/JPY: Trade Uncertainty and Economic Data Shape Trends

Australian Dollar Faces Risks from Weak Trade Data and US-China Tensions

The AUD/USD pair faces downward pressure due to weak trade balance data and rising US-China trade tensions. The chart below illustrates Australia’s trade balance data. The trade surplus dropped to 5,085M in December, missing the expected 7,000M and declining from 6,792M in the previous month. Additionally, exports increased by only 1.1% month-over-month, a sharp slowdown from November’s 4.2% rise. Meanwhile, imports surged 5.9% month-over-month, significantly higher than the previous 1.4% gain. This imbalance pressures the Australian economy and weakens investor confidence in the Australian Dollar.

Moreover, the US-China trade war risks uncertainty for Australia’s economy. China is Australia’s largest trading partner, and if tensions escalate, iron ore and coal exports will likely suffer. China retaliated against the 10% US tariff, raising fears of prolonged economic strain. Growing trade risks have increased market volatility as traders shift toward safer assets.

On the other hand, strong retail sales data may delay an RBA rate cut despite economic concerns. The chart below illustrates the monthly and yearly retail sales growth in Australia. Australian retail sales grew by 4.6% from 12 months to December, indicating resilient consumer spending. However, December saw a decline of 0.1%, signaling potential weakness ahead. Additionally, household discretionary spending remains strong, reducing the likelihood of an immediate rate cut.

President Trump’s decision to suspend the proposed 25% tariffs on Canadian and Mexican imports could ease some trade uncertainty, but the primary focus remains on US-China relations. With external risks mounting, AUD/USD may remain positive in the near term, but the overall outlook remains uncertain.

Rising Wages Strengthen JPY Amid BoJ Policy Shift Speculation

The Japanese Yen (JPY) strengthens as strong wage and services data raise expectations of a hawkish Bank of Japan (BoJ). Real wages showed a positive trend in December, indicating improving household income. Nominal wage growth reached its highest level in nearly 30 years, adding pressure on the BoJ to tighten policy. The chart below shows that nominal wages in Japan rose to 4.8% in December 2024, compared to 3.9% in November 2024.

Rising wages support inflation, which challenges Japan’s long-standing deflationary concerns. Finance Minister Katsunobu Kato acknowledged that deflation has not yet ended but noted ongoing inflationary trends. If inflation persists, the BoJ may shift towards policy normalization, further boosting the Yen. As a result, USD/JPY could face downward pressure in the near term.

AUD/USD Analysis – Symmetrical Broadening Wedge

The AUD/USD pair trades within a symmetrical broadening wedge as price volatility increases due to the US-China trade war. The pair moved toward the $0.61 support zone before reversing higher toward the $0.6350 resistance level. These fluctuations indicate ongoing market uncertainty. The RSI also suggests that the pair rebounds from the support level, making further upside likely. From a technical perspective, AUD/USD remains within a long-term support zone, where US-China trade tensions have induced heightened volatility.

NZD/USD Analysis – Symmetrical Broadening Wedge

The 4-hour chart for NZD/USD has also formed an ascending broadening wedge pattern, indicating that the price may continue to oscillate within a strong volatile range. The strong support lies at $0.5480, while the long-term support zone is between $0.55 and $0.56. The immediate resistance for NZD/USD is at $0.5750. A break above this level will confirm a bottom in NZD/USD.

USD/JPY Analysis – Descending Channel

The USD/JPY continues its downward trend after breaking from the symmetrical broadening wedge pattern. However, the pair has reached the descending channel’s support at $152.20. A rebound from this level may develop, although the overall direction remains downward. The RSI remains in the oversold region, indicating a strong potential rebound in the USD/JPY pair.