Japanese Yen and Aussie Dollar Forecasts: Brace for US Confidence Data, Central Bank Cues

Japan’s Inflation Cools, Testing Hawkish BoJ Bets

On Friday, July 18, inflation figures from Japan influenced sentiment toward the Bank of Japan’s rate path and the USD/JPY pair. Headline inflation eased from 3.5% in May to 3.3% in June, while inflation ex food and energy (core core) rose 3.4% year-on-year, up from 3.3% in May.

The upswing in the core core inflation rate could fuel speculation about a 2025 BoJ rate hike. Notably, the June numbers align with recent reports that the BoJ is considering revising up inflation forecasts at the upcoming July monetary policy meeting.

However, the pickup in underlying inflation is unlikely to trigger a July rate hike. Uncertainties about the impact of US tariffs on Japan’s economy will likely leave the BoJ in a policy holding pattern, limiting Yen appetite.

While the inflation figures influenced Yen demand, US-Japan trade developments will remain a key driver, with a 25% US tariff looming.

USD/JPY Daily Outlook: US Consumer Sentiment and Fed Speaker to Spotlight the Dollar

Later in the session on Friday, US consumer sentiment figures will affect sentiment toward the Fed rate path and US dollar demand. Economists forecast the Michigan Consumer Sentiment Index to increase to 61.5 in July, up from 60.7 in June.

A higher sentiment reading could signal a pickup in consumer spending, potentially fueling demand-driven inflation. A higher inflation outlook may temper Fed rate cut bets, sending USD/JPY toward the 149.358 resistance level. On the other hand, weaker sentiment may signal a more dovish Fed policy stance, pushing the pair toward the 200-day EMA.

Investors should also closely monitor Fed speakers’ views on June’s inflation data and the timeline for rate cuts.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: A US-Japan trade deal, softer US consumer sentiment, hawkish BoJ cues, or dovish Fed signals. Such factors could pull USD/JPY toward the 200-day EMA and potentially the 147.5 level.
• Bullish USD/JPY Scenario: Stalled US-Japan trade talks, higher US consumer sentiment, dovish BoJ rhetoric, or hawkish Fed cues. These may drive the pair toward the 149.358 resistance level.

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

AUD/USD: RBA Rate Cut Speculation Triggers Aussie Dollar Sell-Off

Meanwhile, rising bets on an August RBA rate cut will continue to influence the AUD/USD pair. June’s labor market data raised expectations of multiple RBA rate cuts after the unemployment rate unexpectedly rose from 4.1% in May to 4.3% in June.

The June report followed the July 8 RBA decision to keep interest rates at 3.85% to gain confidence that inflation was sustainably returning to the mid-range of the 2-3% target band. RBA Governor Michele Bullock stated that an August rate cut hinged on the quarterly CPI print since the unemployment rate was low relative to history. Further deterioration in the labor market and persistently soft inflation may force the RBA to cut rates more aggressively.

The AUD/USD pair dropped 0.60% on July 17 to close at $0.64882 amid growing expectations of a more dovish RBA policy stance.

US-China Trade Talks and Beijing Stimulus Signals

Another consideration is US-China trade developments and Beijing’s stimulus plans. China’s economy performed better than expected in Q2 2025 despite US tariffs.

However, economists expect China’s trade terms to deteriorate significantly in the second half of this year. Given that China accounts for one-third of Aussie exports, weaker Chinese demand would impact the Australian economy. With a trade-to-GDP ratio of over 50%, falling external demand may also pressure the RBA into multiple rate cuts to bolster the economy.

Natixis Asia Pacific Chief Economist Alicia Garcia Herrero commented on the economic outlook and the need for further stimulus from Beijing, stating:

“I think they’re going to announce more on the monetary and fiscal side. The fiscal stance in China is at least neutral if not positive. It was negative throughout 2024, so we already are in a stimulus phase. But it’s going to be more so that they can hit the target, which is not too far. First half was so good. So, they just need to do more, but not like a big bang. I am not expecting a big bang. It’s just more of that, what has been sustaining the economy so far.”

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Rising US-China trade friction, dovish RBA chatter, or Beijing’s silence on stimulus. These factors may push AUD/USD below the 50-day EMA, exposing the 200-day EMA.
• Bullish AUD/USD Scenario: A US-China trade deal or more policy stimulus from Beijing could send AUD/USD toward the $0.6550 level.

Click here for a more comprehensive analysis of AUD/USD trends and trade data insights.

AUD/USD Daily Outlook: US Consumer Confidence and Rate Differentials

Later today, the Michigan Consumer Confidence numbers will likely influence US-Australian interest rate differentials and AUD/USD trends.

A sharper rise in consumer confidence could signal a less dovish Fed rate path, widening the rate differential in favor of the greenback. A wider rate differential could pull AUD/USD below the 50-day EMA and bring the 200-day EMA into play. Conversely, weaker confidence may boost bets on a September Fed rate cut. A narrowing rate differential could send the pair toward $0.6550.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ policy cues and US-Japan trade talks.
• USD/JPY and AUD/USD: US consumer confidence, Fed commentary, tariff headlines.
• AUD/USD: US-China trade developments and Beijing’s stimulus moves.

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