Forex News
- USD/JPY softens to around 159.20 in Wednesday’s early Asian session.
- Potential of further intervention from Japanese officials might underpin the Japanese Yen.
- Iran threatened to retaliate after the US strikes on launch sites and boats.
The USD/JPY pair loses ground to near 159.20 during the early Asian trading hours on Wednesday. Speculations that Japanese authorities will step in again to prop up the currency provide some support to the Japanese Yen (JPY) against the US Dollar (USD).
The US April Personal Consumption Expenditures (PCE) Price Index report will be in the spotlight later on Thursday.
Traders remain on high alert for further currency interventions as top FX diplomat Atsushi Mimura warned that speculative short positions will continue to be heavily monitored. Finance Minister Satsuki Katayama said that Japan stands ready to act against excessive foreign exchange volatility at any time, while ensuring that any intervention is conducted in a way that avoids pushing up US Treasury yields.
Bank of Japan (BoJ) Governor Kazuo Ueda said on Wednesday that the current Middle East conflict represents Japan's fifth major oil shock, warning that initial conditions, including wages, expectations, and exchange rates, will determine whether it proves temporary or persistent.
On Tuesday, the United States (US) launched defensive attacks on boats and missile sites in Iran, raising fears of renewed tensions in the Middle East. Iran’s Revolutionary Guard Corps (IRGC) stated that it reserved the “legitimate and definite” right to retaliate against any ceasefire violations by the US.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- WTI declines as traders weigh potential progress toward a US-Iran peace agreement.
- Oil prices could rebound as fresh regional military clashes intensify diplomatic friction.
- Iran condemns recent US airstrikes in Hormozgan, calling them a "gross violation" of the seven-week-old ceasefire.
West Texas Intermediate (WTI) oil price declines after registering more than 3% gains in the previous day, trading around $91.90 per barrel during the Asian hours on Wednesday. Crude oil prices decline as traders weigh potential progress toward a US-Iran peace agreement.
However, oil prices could rebound due to renewed tensions and ongoing uncertainty around the strategic Strait of Hormuz. The diplomatic friction comes amid fresh military clashes in the region. The US military confirmed it launched self-defense strikes in southern Iran, while Iran’s Revolutionary Guard claimed it targeted an American F-35 fighter jet and several drones that had allegedly violated Iranian airspace.
Iran's foreign ministry has condemned recent US airstrikes in the southern Hormozgan province, labeling them a "gross violation" of a tenuous, seven-week-old ceasefire. The statement followed reports from Iranian media of explosions echoing through the region early Tuesday morning.
The escalation threatens to derail delicate diplomatic progress, as both nations had previously been advancing toward a memorandum of understanding. The proposed framework aims to halt the broader conflict and lift blockades to restart vital shipping through the strategic waterway.
If finalized, the initial agreement would grant negotiators a 60-day window to resolve more deeply entrenched and complex issues. Chief among these points of contention is the future of Iran's nuclear program.
Meanwhile, regional powers, including Saudi Arabia, Qatar, and the United Arab Emirates, are actively pressing US President Donald Trump to prioritize diplomacy. These neighboring states fear that further military escalation could push Iran to launch retaliatory strikes across the wider region.
US Secretary of State Marco Rubio noted that a final agreement could still take several days to finalize. Key sticking points remain, specifically concerning the release of Tehran's frozen assets and Iran's hesitation to guarantee unrestricted maritime passage through the crucial Strait of Hormuz.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
Bank of Japan (BoJ) Governor Kazuo Ueda said that identical oil price hike can produce varied impacts based on wages, expectations, demand, and currency rates, Reuters reported on Wednesday.
Key quotes
Supply disruptions are top of mind, not new but increasingly common.
Central banks shouldn’t focus solely on oil prices.
Identical oil price hike can produce varied impacts based on wages, expectations, demand, and currency rates.
High inflation expectations and rising wages increase risk of second-round effects.
Low expectations and stagnant wages may keep underlying inflation down despite large cost shock.
Dividing line between temporary and persistent inflation isn’t fixed.
Temporary shock may turn lasting if it alters wages, expectations, and price-setting behavior.
Conversely, a major shock can stay temporary if transmission channels don't activate.
Japan's experience with oil shocks shows they are tests of the entire inflation framework, not just oil price shocks.
Energy shock since 2021 helped shift Japan from deflation but not into 1970s-style inflation spiral.
Market reaction
As of writing, the USD/JPY pair is down 0.15% on the day at 159.22.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- EUR/USD flatlines around 1.1640 in Wednesday’s early Asian session.
- Iran threatened retaliation after the US bombed missile sites and mine-laying boats.
- ECB’s Villeroy said the central bank will do what is necessary to tame inflation.
The EUR/USD pair trades on a flat note near 1.1640 during the early Asian session on Wednesday. However, the potential upside for the major pair might be limited amid renewed tensions in the Middle East after Iran threatens to retaliate after US strikes on launch sites and boats.
Iranian Supreme Leader Mojtaba Khamenei said that Gulf powers will no longer be a shield for US bases and the US will no longer have a safe haven in the region, per the Guardian. Furthermore, Iran’s Revolutionary Guard Corps (IRGC) stated that it reserved the “legitimate and definite” right to retaliate against any ceasefire violations by the US.
The tensions between Washington and Tehran have renewed after US President Donald Trump said negotiations with Iran to extend their ceasefire and reopen the crucial waterway are proceeding. Uncertainty and signs of a prolonged conflict in the Middle East could boost a safe-haven currency such as the Greenback and create a headwind for the major pair.
On the other hand, hawkish comments from the European Central Bank (ECB) could underpin the shared currency. ECB policymaker Francois Villeroy de Galhau said on Tuesday that the central bank “will do what is necessary” to keep inflation on target. ECB board member Isabel Schnabel stated that the central bank should raise interest rates in June, even if ongoing peace talks with Iran yield a deal, as the conflict has been far longer than projected and high energy prices are spilling into the broader economy.
According to the ECB Watch Tool, financial markets are now pricing in nearly an 85% odds of a 25-basis-point hike from the ECB for the June meeting.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The Islamic Revolutionary Guard Corps (IRGC) threatened to retaliate after the United States (US) carried out strikes on southern Iran in “self-defence,” CNN reported on Tuesday. The IRGC also claimed that 25 vessels, including oil tankers, transited Hormuz during the “last day and night.”
Iran’s Foreign Ministry condemned the US attacks as a violation of a ceasefire that’s been in place since early April. Meanwhile, Iranian Supreme Leader Mojtaba Khamenei said that “nations and lands of the region will no longer be a shield for American bases."
US Secretary of State Marco Rubio said it could take "a few days" to negotiate a deal to halt the conflict, after both sides are working toward a memorandum of understanding.
However, disputes over language concerning Iran’s nuclear program and sanctions have held up a deal. One contentious issue under negotiation is Iran’s $24 billion in frozen assets, with Tehran wanting half that amount released upon the signing of an agreement, the semi-official Tasnim news agency reported.
Market reaction
Crude oil prices attract some buyers following this headline. At the time of writing, the West Texas Intermediate (WTI) is up 2.92% on the day at $92.15.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- Gold price edges lower to near $4,500 in Wednesday’s early Asian session.
- Uncertainty over the US-Iran peace deal and the vital Strait of Hormuz weighs on the Gold price.
- Markets currently expect a 25-basis-point Fed rate hike in December.
Gold price (XAU/USD) loses ground to around $4,500 during the early Asian session on Wednesday. The precious metal extends the decline as fresh US military strikes on Iran dimmed hopes of a peace deal and reinforced concerns that persistent inflation could keep interest rates higher for longer.
Security in the Strait of Hormuz remained unclear after the US and Iran exchanged strikes on Tuesday, and US Central Command pushed back on reports that suggested the military was helping escort vessels.
The renewed clashes occurred just hours after US President Donald Trump said negotiations with Tehran to extend their ceasefire and reopen the crucial waterway are proceeding.
“While hope of a US-Iran deal has offered some support, the situation remains fragile and persistent, as inflation fears continue to loom over precious metals,” said Ryan McKay, senior commodity strategist at TD Securities.
Kevin Warsh was sworn in as US Federal Reserve (Fed) chairman on Friday. He took over the leadership of the US central bank amid growing expectations of tighter global monetary policy. It’s worth noting that Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high.
Traders are now pricing in a 39.0% chance that the Fed will raise interest rates by 25 basis points (bps) by year-end, according to the CME FedWatch tool.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- AUD/JPY holds uptrend but stalls below 114.74 resistance.
- RSI flattens in bullish territory, signaling fading buyer momentum.
- Break below 114.00 exposes 113.63 and 112.77 supports.
The Australian Dollar registers modest gains of 0.14% against the Japanese Yen as improved risk appetite increased demand for riskier currencies, eroding the Yen's safe-haven status. At the time of writing, the AUD/JPY trades at 114.17, after reaching a daily low of 113.78.
AUD/JPY Price Forecast: Technical outlook
Price action shows the uptrend remains intact, but fears of a possible intervention in the FX markets to prop up the Yen are capping the advance.
Going upwards, the AUD/JPY's first key resistance area is the yearly peak at 114.74, which, once surpassed, opens the door to test 115.00. A breach of the latter will expose the 115.50 mark, followed by the psychological 116.00.
The Relative Strength Index (RSI), although bullish, has turned flat, an indication that buyers may be losing momentum. Hence, caution on the upside is warranted, as Japanese authorities might not hesitate to propel the Yen, an invitation for further downside on the cross-pair.
Downwards, the first support for AUD/JPY would be 114.00. Below this level, the next area of interest would be the 20-day SMA at 113.63, before it dives to the 50-day SMA at 112.77.
AUD/JPY Price Chart – Daily
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | 0.40% | 0.24% | 0.07% | 0.08% | 0.62% | 0.35% | |
| EUR | -0.10% | 0.33% | 0.15% | -0.02% | 0.03% | 0.56% | 0.25% | |
| GBP | -0.40% | -0.33% | -0.19% | -0.35% | -0.31% | 0.22% | -0.06% | |
| JPY | -0.24% | -0.15% | 0.19% | -0.17% | -0.14% | 0.36% | 0.13% | |
| CAD | -0.07% | 0.02% | 0.35% | 0.17% | 0.04% | 0.56% | 0.29% | |
| AUD | -0.08% | -0.03% | 0.31% | 0.14% | -0.04% | 0.52% | 0.23% | |
| NZD | -0.62% | -0.56% | -0.22% | -0.36% | -0.56% | -0.52% | -0.26% | |
| CHF | -0.35% | -0.25% | 0.06% | -0.13% | -0.29% | -0.23% | 0.26% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
- The Aussie has surged 14% on the Kiwi since July, powered by two central banks moving in opposite directions.
- That rate gap is now at its widest, but both banks are converging again and draining the trend's fuel.
- Back-to-back Australian inflation and an RBNZ decision on Wednesday could be the inflection point.
The Australian Dollar has spent the better part of a year bullying its trans-Tasman cousin, and the scoreboard is lopsided. AUD/NZD has just tagged its highest level since around 2013, up roughly 14% from its July low, closing higher in eight of the last ten months and on pace to make it eleven. The engine behind that run is the rarest thing in currency markets, two neighbouring central banks marching in opposite directions at the same time. The trouble for anyone still chasing the Aussie higher here is that this is precisely the moment the engine starts to run out of fuel.
Two neighbours, two opposite playbooks
The divergence has been stark. The Reserve Bank of New Zealand (RBNZ) slashed its Official Cash Rate (OCR) from a 5.5% peak all the way to 2.25%, the most aggressive easing cycle in the developed world, as the New Zealand economy ground through a downturn. The Reserve Bank of Australia (RBA) did the exact opposite, hiking three times this year to 4.35% as Australian growth held up and inflation refused to cool. The same Middle East Oil shock that is feeding price pressure on both sides of the Tasman landed on two economies sitting at opposite ends of the cycle, and the central banks responded in opposite directions. The result was a yield gap that blew out in the Aussie's favour and a trend that has only really known one way.
The fuel gauge is dropping
Here is the catch. A trend built on a widening rate gap struggles the moment that gap stops widening, and convergence is now creeping in from both ends. The RBNZ has stopped cutting entirely, holding three meetings in a row, and is openly flirting with hikes because its own inflation is breaching the top of its target band and heading toward 4%. The RBA, after three straight increases, has signalled it now has room to pause and assess. So the differential that has powered the Aussie for a year is set to plateau, and could begin narrowing if the Kiwi side starts hiking while the Aussie side sits still. The very mechanism that drove the move is quietly going into reverse.
Stretched at levels last seen 13 years ago
The chart is flashing the same warning. On the monthly candlesticks, the Stochastic RSI is pinned in overbought territory near 80, and price is pressing into a region the pair has not visited in roughly 157 months. Closing green in eight of the last ten months is an extraordinarily persistent run, and persistence like that tends to mean-revert rather than extend indefinitely. The Aussie is currently leaning on the 1.2300 handle, a long way above its rising daily averages, with the 50-day sitting back near 1.2100 as the first real trend support. This is not a top call, but it is a mature trend meeting its first serious overhead resistance with momentum already stretched thin.
Wednesday is the inflection
The timing could hardly be sharper. Wednesday delivers a back-to-back trans-Tasman collision, with Australian Consumer Price Index (CPI) data at 01:30 GMT followed just thirty minutes later by the RBNZ decision at 02:00 GMT and its press conference at 03:00 GMT. The bullish-Aussie case needs hot Australian inflation to keep the RBA hiking, paired with a dovish RBNZ. The reversal case needs the opposite, and consensus is leaning that way. Headline CPI is seen cooling to around 4.4% YoY from 4.6%, which would hand the RBA exactly the excuse it flagged to pause, while a hawkish RBNZ that upgrades its inflation track and signals hikes would attack the trade from the other side.
For now the bias stays higher while the pair holds above the 1.2250 area, with a clean monthly break of the 1.2300 handle opening a path toward the 1.2400 zone where the 2013 highs sit. The more interesting setup, though, is the fade. A soft inflation print and a hawkish RBNZ on Wednesday could cap the move, and a slip back below the 1.2200 handle would be the first real crack in the gap-driven trend, with the rising 50-day near 1.2100 marking the line that still defines the broader uptrend. The Aussie has had the Kiwi's number for nearly a year. Wednesday is when the market finds out whether the gap can keep doing all the heavy lifting.
AUD/NZD weekly chart
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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