EUR/USD, USD/JPY and AUD/USD forecast: Volatility ahead amid trade conflicts and Fed outlook
EUR/USD, USD/JPY, and AUD/USD react to trade tensions and rate expectations
The broader forex market remains sensitive to developments in U.S. trade policy and monetary policy expectations. While the U.S. Producer Price Index (PPI) showed easing inflation, fueling speculation of Fed rate cuts in June, ongoing trade tensions with the EU, Japan, and Australia could lead to further volatility in the coming weeks.
Traders will watch Michigan Consumer Sentiment data and U.S.-EU tariff negotiations for the next directional move in forex markets.
EUR/USD, USD/JPY, and AUD/USD price forecast (Source: TradingView.)
EUR/USD consolidates as tariff concerns weigh on sentiment
The EUR/USD pair is trading near 1.0895 amid escalating trade tensions between the United States and the European Union. The pair remains under mild downward pressure as investors assess the implications of a potential 200% tariff on EU alcohol imports, announced by President Donald Trump in response to Europe’s countermeasures on American whiskey.
The European Central Bank (ECB) remains cautious, with Bundesbank President Joachim Nagel warning that a prolonged trade war could tip Germany into recession. The EUR/USD rally from early March is taking a pause, with technical indicators pointing toward range-bound trading between 1.0680 and 1.0950. Analysts suggest that while the pair may dip below 1.0820, a decline to 1.0780 is unlikely in the near term.
USD/JPY stable but faces pressure from BOJ rate hike speculation
The USD/JPY pair is trading in a narrow range between 147.45 and 148.70, as investors weigh expectations for a Bank of Japan (BOJ) rate hike in May. Japan’s largest labor union, Rengo, secured a 5.46% wage hike, the highest since 1991, raising concerns that inflationary pressures could push the BOJ to tighten policy sooner than expected.
However, analysts at UOB Group expect USD/JPY to remain within the 146.50–149.50 range, as the Federal Reserve’s dovish pivot limits upside potential for the U.S. dollar. Unless U.S. economic data improves, it will be difficult for USD/JPY to sustain a move above 150 in the near term.
AUD/USD weakens as commodity prices fail to offset trade risks
The Australian dollar (AUD/USD) trades near 0.6290, struggling after breaking below the ascending channel on the daily chart. The 25% U.S. tariff on Australian aluminum and steel exports remains a key risk factor, with Australian Prime Minister Anthony Albanese confirming that his government will not retaliate.
Despite support from rising gold, steel, and iron ore prices, the AUD remains under pressure due to uncertainty in global trade and U.S.-China negotiations. Analysts expect AUD/USD to remain within the 0.6245–0.6385 range, with 0.6187 acting as a critical support level.
In a prior analysis, EUR/USD was forecasted to target a five-month high of 1.0930, backed by expectations of a Federal Reserve rate cut in May. However, current trade tensions and ECB caution have slowed momentum.
