Japanese Yen and Aussie Dollar Forecast: AUD/USD Rises Ahead of Key Australia CPI

Bank of Japan Turns Hawkish: Is a Rate Hike Coming?

Recent Japanese economic indicators have fueled speculation about a Q4 Bank of Japan rate hike, weighing on the USD/JPY pair. Key data included national inflation figures for July. The numbers raised expectations of monetary policy tightening, potentially as soon as October. The so-called core-core inflation rate held steady at 3.4%, hovering well above the BoJ’s 2% target.

Tracy Shuchart, economist at NinjaTrader, commented:

“Core Japanese inflation, excluding fuel and fresh food, is now higher than in the US for the first time in 48 years – excluding two one-year periods when the figures were distorted by a sales tax hike.”

Additionally, a pickup in wage growth could fuel consumer spending and demand-driven inflation, pressuring the BoJ to hike interest rates. Economists recently reported a central government proposal for a record increase in minimum wages this year. Notably, economists expect an even higher minimum wage as provinces—who have the final say—are pushing for even larger increases.

On Saturday, August 23, Bank of Japan Governor Kazuo Ueda commented:

“Notably, wage growth is spreading from large enterprises to small and medium enterprises (SMEs). Barring a major negative demand shock, the labor market is expected to remain tight and continue to exert upward pressure on wages.”

For inflation to rise, wage gains would need to translate into stronger private consumption. Economists widely expect no move in September, leaving October as the more probable window. Although September remains unlikely, speculation about a surprise move could still boost Yen demand.

USD/JPY Daily Outlook: Fed Speakers Under the Spotlight

Later in the session on Wednesday, FOMC members’ speeches will face increased scrutiny. The spotlight is on the Fed after President Trump’s recent attempt to fire Fed Governor Lisa Cook. While Fed Chair Powell hinted at a potential September Fed rate cut, economists remain uncertain about the Fed rate path through Q4.

Support for multiple Fed rate cuts could weigh on the US dollar, pushing USD/JPY toward the 50-day Exponential Moving Average (EMA). If breached, 145 would be the next key support level. On the other hand, calls to delay policy easing because of elevated inflation may drive the pair above the 200-day EMA, opening the path toward the 149.358 resistance level..

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Hawkish BoJ guidance or dovish Fed rhetoric could drag USD/JPY toward 145.
• Bullish USD/JPY Scenario: Dovish BoJ chatter or hawkish Fed signals may send the pair toward the 150.

See today’s full USD/JPY forecast with chart setups and trade ideas.

While speculation mounts over the BoJ, attention is also turning to the RBA, with markets betting on an RBA rate cut in November.

AUD/USD: Monthly CPI Inflation to Spotlight the RBA

Turning to the AUD/USD pair, Australia’s Monthly CPI Indicator will influence the appetite for the Aussie dollar. Economists forecast the annual inflation rate to rise from 1.9% in June to 2.3% in July.

A sharper increase could temper expectations of a Q4 RBA rate cut, boosting demand for the Aussie dollar. Conversely, markets may speculate about a September cut if inflation falls sharply. However, most economists see November as the likelier outcome.

In August, the RBA cut the cash rate by 25 basis points, to 3.6%. RBA Governor Michele Bullock hinted at further policy easing during the press conference. She stating that the RBA’s 2025 forecasts are assuming a couple more cuts. Notably, the RBA didn’t dismiss the possibility of back-to-back cuts, indicating that board members will assess the data at each meeting.

When do economists expect the RBA to cut rates again?

AMP Head of Investment Strategy and Chief Economist Shane Oliver remarked on the RBA’s Meeting Minutes, stating:

“RBA minutes reiterated dovish guidance, noting the cash rate is ‘still somewhat restrictive’ & ‘some further reduction in the cash rate over the coming year’ is likely required, with reference to the pace being gradual and data determined. We expect cuts in Nov, Feb & May to 2.85%.”

Today’s inflation numbers would have to be significantly lower than in June to pressure the RBA into a September cut.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Softer inflation or dovish RBA cues. These factors could drag AUD/USD below the 50-day EMA and bring the 200-day EMA and $0.6450 support level into play.
• Bullish AUD/USD Scenario: Hotter-than-expected inflation or hawkish RBA chatter. These factors could send AUD/USD toward the $0.6550 resistance level, paving the way toward the $0.66 level.

Explore our full AUD/USD analysis, including key trends and trade data, here.

AUD/USD Daily Outlook: Will Fed Speakers Narrow Rate Differentials?

While economists expect a November RBA rate cut, Fed Chair Powell’s hint of a near-term Fed rate cut sent AUD/USD to $0.65.

FOMC members’ support for a September rate cut and further policy easing in Q4 would narrow the US-Aussie rate differential in favor of the Aussie dollar. A narrowing rate differential may drive AUD/USD toward the $0.6550 level. A break above $0.6550 brings $0.66 into sight.

However, rising concerns about inflation over a cooling labor market could signal a less dovish Fed policy stance. Fewer rate cuts may widen the rate differential in favor of the US dollar. A wider differential could push AUD/USD below the 50-day EMA, exposing the 200-day EMA. If breached, $0.6400 would be the next support level.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ commentary and upcoming Japanese economic data (due on Friday, August 29).
• USD/JPY and AUD/USD: Fed speakers.
• AUD/USD: Aussie inflation and RBA commentary.

For more in-depth analysis, review today’s USD/JPY and AUD/USD trading setups in our latest reports and consult the economic calendar.