Japanese Yen and Aussie Dollar Forecasts: BoJ Hawkish Tilt, RBA Rate Cut Looms

Key Data to Spotlight the Yen and the BoJ

The yen heads into a pivotal week as the BoJ hints at rate hikes, with inflation, and GDP data set to influence USD/JPY trends.

On Friday, August 8, the Bank of Japan’s Summary of Opinions revived expectations of a Q4 interest rate hike. One opinion stated:

“It has become more likely, compared to April, that the Bank can judge that the price stability target will be achieved in the first half of the projection period of the Outlook Report.”

The board member highlighted several key considerations, including:

• US-Japan trade developments.
• Positive wage- and price-setting trends.
• Higher prices.

Commenting on inflation, the board member stated:

“With inflation remaining significantly above 2 percent for more than three years, inflation expectations can be considered to have reached around 2 percent, and there is concern as to whether they will rise further.”

However, another board member underscored the need to assess the potential impact of US tariffs on Japan’s economy, saying:

“At least two to three more months are needed to assess the impact of U.S. tariff policy. If the U.S. economy is able to withstand the impact to a greater extent than expected, the downward effects on Japan’s economy are likely to remain minimal. In that case, it may be possible for the Bank to exit from its current wait-and-see stance, perhaps as early as the end of this year.”

Upcoming Economic Indicators Crucial for the BoJ

This week, key economic indicators, including producer prices and GDP data for the second quarter, will provide key insights into potential price trends and economic momentum. Higher producer prices, a pickup in external demand, and rising private consumption may boost BoJ rate hike bets. On the other hand, softer data would support calls for a wait-and-see monetary policy stance, weighing on Yen demand.

East Asia Econ remarked on the Japan Economic Watchers (EW) survey, stating:

“Japan – inflation concerns grow. Today’s EW survey suggests stabilization in sentiment following the sharp deterioration in Q1. As that happens and high-frequency price measures stop falling, officials, both on the BOJ MPC and in the wider government, are expressing more concern about the continued strength of inflation.”

On Monday, August 11, investors should closely monitor BoJ commentary amid ongoing uncertainty about the timing of a BoJ rate hike.

USD/JPY Daily Outlook: Fed Speakers in Focus

Later in the session on Monday, Fed rhetoric may fuel speculation about a September rate cut and further policy easing in Q4.

Rising support for a September rate cut and further rate cuts in Q4 could weigh on the US dollar. A more dovish policy outlook may push USD/JPY toward the 50-day EMA. If broken, the crucial 145 support level will come into play.

On the other hand, calls to delay rate cuts to assess the effect of tariffs on inflation may lift the US dollar. A less dovish Fed stance could send the pair toward the 200-day EMA and bring the 149.358 resistance level into sight.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Hawkish BoJ rhetoric or dovish Fed signals could send USD/JPY toward the 50-day EMA, potentially testing the 145 support level.
• Bullish USD/JPY Scenario: Dovish BoJ cues or hawkish Fed chatter may send the pair toward the 200-day EMA and potentially the 149.358 resistance level.

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

AUD/USD: RBA Interest Rate Decision Looms

Turning to the AUD/USD pair, investor focus will shift to Tuesday’s RBA interest rate decision. Economists expect the RBA to cut interest rates by 25 basis points to 3.6%. Barring a surprise hold or larger 50-basis-point rate cut, the RBA’s policy guidance will be crucial for AUD/USD trends.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero remarked on the upcoming RBA’s interest rate decision, stating:

“Only a 25bp hawkish cut will be delivered in August. The fight against inflation seems to have been finally, at least for now, opening the door for the Reserve Bank of Australia (RBA) to ease at the policy meeting on August 12th.”

However, despite underlying inflation easing from 2.9% year-on-year in Q1 to 2.7% in Q2, Garcia suggested a cautious policy outlook, adding:

“While these developments are expected to support a rate cut at the next meeting, Governor Bullock is likely to keep a cautious stance, potentially emphasizing data dependency.”

Garcia cited tight labor market conditions and consumer inflation expectations as reasons for a hawkish rate cut. She concluded:

“A more dovish stance by the Governor could end up re-igniting inflation pressure.”

However, later in the week, labor market data will influence the RBA rate path. The AUD/USD could see increased sensitivity to the data if RBA Governor Bullock delivers a data-dependent policy outlook.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Weak Aussie data or a dovish RBA rate cut. These factors could push AUD/USD toward the 50-day EMA, potentially bringing the 200-day EMA into play.
• Bullish AUD/USD Scenario: Positive Aussie data or a hawkish RBA stance. These factors could drive AUD/USD toward the crucial $0.66 resistance level.

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

AUD/USD Daily Outlook: The Fed Cues and Rate Differentials

Later today, Fed chatter could fuel speculation about multiple Fed rate cuts and affect US-Australian interest rate differentials.

Hawkish Fed policy signals would widen the rate differential in favor of the US dollar. A less hawkish Fed rate path could push AUD/USD toward the 50-day EMA. If broken, the bears may target the 200-day EMA.

Conversely, support for a 50-basis-point September Fed rate cut would narrow the rate differential. A more dovish Fed rate path could drive AUD/USD toward the $0.66 resistance level. A sustained move above the $0.66 level opens the door to testing the July high of $0.6625.

Key Market Drivers to Watch Today:

• USD/JPY: Japan producer prices and GDP data, and BoJ policy cues.
• USD/JPY and AUD/USD: US CPI Report and Fed rhetoric.
• AUD/USD: RBA interest rate decision, Governor Michele Bullock’s press conference, and key labor market data.

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