Japanese Yen and Aussie Dollar Forecasts: BoJ Labor Jitters, US Services PMI in Focus

Japan Unemployment Jumps—What It Means for USD/JPY Traders

A surprise uptick in Japan’s unemployment rate rattled traders, clouding October BoJ rate hike bets and putting USD/JPY in sharp focus.

Japan’s unemployment rate increased from 2.3% in July to 2.6% in August, adding support for a more dovish BoJ policy stance.

Why do traders need to consider labor market data for USD/JPY trends?

A cooling labor market could curb wage growth and dampen consumer spending. A pullback in consumer spending may soften demand-driven inflation, tempering bets on a near-term BoJ rate hike. A more dovish BoJ policy stance would likely weigh on appetite for the Japanese yen.

The Bank of Japan’s Summary of Opinions underscored the significance of incoming data. One policymaker stated:

“In conducting monetary policy, it will be necessary to closely monitor the following three factors: the impact on the global economy of trade policy in each jurisdiction, the direction of US monetary policy and of foreign exchange rates, and the outlook for prices and wages in Japan.”

Nonetheless, policymakers may highlight inflation risks that could revive hawkish bets.

With the BoJ decision looming, traders should pay close attention to upcoming speeches. BoJ Governor Kazuo Ueda is on the calendar to speak later in the morning session. Views on US tariffs, the economic outlook, and consumer price trends will move the dial.

US Fed Speakers, ISM Services PMI, and USD/JPY Outlook

Across the Pacific, the ISM Services PMI looms large for Fed policy watchers, with a softer print likely to fuel fresh recession chatter. Economists forecast the ISM Services PMI to drop from 52 in August to 51.7 in September.

A sharper drop in the headline Services PMI may revive recession fears, given that the services sector contributes about 80% to the US GDP. Beyond the headline PMI, traders should also consider employment and price trends, two key considerations for the Fed.

Softer prices and a larger labor market contraction would support multiple Fed rate cuts in the fourth quarter, pushing USD/JPY toward 145. Conversely, rising trends may support a less dovish Fed rate path, sending USD/JPY toward 147.5 and the 50-day EMA.

Beyond the data, traders should closely monitor Fed speakers for clues on the timing of monetary policy easing.

USD/JPY Scenarios: Hawkish BoJ vs. Dovish Fed Risks

• Bearish USD/JPY Scenario: Hawkish BoJ chatter, weak US Services PMI data, or dovish Fed cues. These scenarios could push USD/JPY toward 145.
• Bullish USD/JPY Scenario: Dovish BoJ commentary, strong US economic data, or hawkish Fed rhetoric could drive the pair toward 147.5.

Read the full USD/JPY forecast, including chart setups and trade ideas.

As traders consider the BoJ’s views on recent Japanese economic data, attention remains on the AUD/USD as Aussie data clouds the RBA’s policy outlook.

Aussie Services PMI and the Aussie Dollar in the Spotlight

Turning focus to the AUD/USD pair, the S&P Global Services PMI dropped from 55.8 in August to 52.4 in September, up from a preliminary 52.0.

Slower services sector activity could weigh on the Aussie economy, given that the sector contributes between 60% and 70% to the GDP.

Notably, employment and price trends diverged, further complicating the RBA’s monetary policy outlook. While job growth accelerated to a five-month high, inflation cooled.

Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, commented on the September survey, stating:

“On the price front, the easing of service sector output price inflation is a welcome development in supporting demand and in providing some room for monetary policy to further loosen before the end of the year.”

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Dovish RBA chatter and rising trade tensions may drag AUD/USD toward the 50-day EMA and $0.655.
• Bullish AUD/USD Scenario: Hawkish RBA comments and easing trade friction could drive AUD/USD toward $0.665.

See our full AUD/USD analysis for detailed trends and trade setups.

US Services and Interest Rate Differentials

Amid lingering uncertainty about the timeline for an RBA rate cut, US services sector data could influence the number of Fed rate cuts in the fourth quarter.

A higher PMI, combined with rising prices and employment, could reduce bets on Fed rate cuts. A more hawkish Fed policy stance would widen the interest rate differential, favoring the US dollar. A wider rate differential may push AUD/USD toward the 50-day EMA and $0.655.

On the other hand, a lower PMI, falling prices, and job cuts could support multiple Fed rate cuts in the fourth quarter. A narrowing interest rate differential, favoring the Aussie dollar, could send AUD/USD toward $0.665.

Key Market Drivers to Watch Today:

• USD/JPY: Watch BoJ speeches.
• USD/JPY and AUD/USD: Monitor US Services PMI data and FOMC members’ speeches.
• AUD/USD: Track trade developments 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.