[ad_1]
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.
[ad_2]
