AUD/USD, NZD/USD, and USD/JPY Analysis: US Dollar Weakness Fuels Diverging Trends

AUD/USD Gains as US Dollar Weakens on Fiscal Concerns

AUD/USD increased toward $0.6440 on Wednesday. The pair gained as the US Dollar slid after Moody’s downgraded the US credit rating. The US Dollar Index (DXY) dropped below 99, its lowest level in two weeks. This decline reflects growing market concern about US fiscal health.

Moody’s downgrade from Aaa to Aa1 followed the approval of President Trump’s tax-cut bill. Investors fear this will further increase the fiscal deficit. Trump’s failure to rally full Republican support for the bill added more uncertainty. As sentiment weakened, the US Dollar lost value against most major currencies, including the Australian Dollar.

The AUD traded mixed on Wednesday after the Reserve Bank of Australia cut interest rates by 25 basis points. The RBA reduced its Official Cash Rate from 4.10% to 3.85%, citing confidence in declining inflation. The central bank left the door open for further easing. This dovish stance slightly capped AUD gains, but dollar weakness remained the primary driver.

Improving credit conditions also supported risk-sensitive currencies. The chart below shows a decline in high-yield corporate bond yields, indicating better credit access. This boosted investor sentiment and lifted AUD/USD. As long as the DXY remains weak, the AUD/USD may continue to rise toward resistance levels.

USD/JPY Slides Below 144 as Dollar Weakness and BoJ Outlook Weigh

USD/JPY dropped below the key psychological level of 144.00 on Wednesday. This level now acts as resistance and highlights renewed bearish sentiment. The drop reflects broader US Dollar weakness following Moody’s downgrade.

The Congressional Budget Office warned it could expand the deficit by $3.8 trillion over ten years. This triggered more caution in USD trading. Investors worry about long-term US credit risk and its impact on Treasury yields and debt markets.

Meanwhile, the Japanese Yen gained support from domestic and global shifts. The Bank of Japan has started signalling potential policy normalisation. Inflation and wage growth have pressured the BoJ to consider rate hikes. This marks a departure from its previous ultra-loose stance.

Moreover, Japanese officials support narrowing interest rate gaps. This would strengthen the Yen and ease imported inflation. With market volatility rising, safe-haven demand for the Yen remains high. As a result, bearish pressure on USD/JPY will continue unless US policy clarity improves.

AUD/USD Technical Analysis – Ascending Broadening Wedge

The 4-hour chart for AUD/USD shows that the price is consolidating within an ascending broadening wedge pattern. The sharp decline in the US Dollar Index has supported the upward trend in AUD/USD. The pair is rebounding from the $0.6370 support level within the wedge and is aiming for continued movement toward $0.6570. A breakout above $0.6570 is required for AUD/USD to confirm further upside.

NZD/USD Technical Analysis – Consolidation

The 4-hour chart for NZD/USD shows a positive trend. The orange zone highlighted in the chart indicates that the price consolidates within this range. The bullish momentum will likely continue if the price remains above $0.5950. NZD/USD has found strong support at the major support zone around $0.55, and the rebound from this level suggests continued bullish momentum in the pair.

USD/JPY Technical Analysis – Descending Broadening Wedge

The 4-hour chart for USD/JPY shows that the pair is trending within a descending broadening wedge. The rebound from the 140 level failed to break the resistance at 148.30, triggering renewed downward momentum. The continued weakness in the US Dollar Index further reinforces this bearish trend. With the pair now trading below the 144.30 level, bearish momentum will likely persist. A break below 140 is likely and would confirm a stronger downward move in USD/JPY.