Japanese Yen and Aussie Dollar Forecasts: Flash PMIs and the Middle East in Focus

Japan Services PMI Crucial for BoJ Rate Hike Bets

On Monday, June 23, flash manufacturing and services sector PMI data will spotlight the Bank of Japan and influence USD/JPY trends. Economists forecast the Jibun Bank Manufacturing PMI to rise from 49.4 in May to 49.5 in June and the Services PMI to climb to 51.5 (May: 51).

The Services PMI will likely be the focal point for markets and the BoJ, given services accounts for around 70% of Japan’s GDP. Beyond the headline PMI, traders should assess trends in prices, the labor market, and demand. Rising prices, job creation, and demand may boost bets on a 2025 BoJ rate hike, fueling Yen appetite. Conversely, softer trends may signal a less hawkish BoJ stance, pressuring the Yen.

BoJ Governor Kazuo Ueda reiterated the Bank’s commitment toward monetary policy normalization on June 20, stating it would raise interest rates if economic momentum keeps inflation on a sustainable path toward the 2% target.

USD/JPY Daily Outlook: US Services PMI and the Fed in Focus

Later in the session, the S&P Global Services PMI will impact US dollar demand and USD/JPY movements. Economists forecast the Services PMI to drop from 53.7 in May to 52.9 in June.

A lower PMI reading could raise bets on a Q3 Fed rate cut, potentially dragging USD/JPY toward the 50-day EMA. A break below the 50-day EMA may pave the way to 144.5. Conversely, a higher print could temper 2025 Fed rate cut bets, sending the pair toward the 149.358 resistance level.

However, beyond the headline PMI, price trends will need consideration since the services sector accounts for around 80% of the US GDP.

While Monday’s PMI data are crucial for the BoJ and the Fed, trade developments and the Iran-Israel conflict may continue driving market volatility. US-Japan trade frictions could impact the Japanese economy and hopes for a BoJ rate hike. However, an escalation in the Middle East conflict may boost demand for safe-haven assets, including the Yen.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Escalation in the Israel-Iran war, Strong Japanese PMI data, hawkish BoJ rhetoric, or weak US data could drag USD/JPY toward 144.5.
• Bullish USD/JPY Scenario: Easing Middle East tensions, weak Japanese PMI data, dovish BoJ cues, or strong US data may send the pair toward 149.358.

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

AUD/USD in Focus: Flash PMIs Signal Economic Momentum Loss

Meanwhile, flash private sector PMI numbers from Australia put the AUD/USD pair in focus early in the June 23 session. The S&P Global Services PMI rose from 50.6 in May to 51 in June, while the Manufacturing PMI increased to 51.3 in June (May: 51).

According to the Flash PMI survey,

• Job creation was broad-based as manufacturers and service providers increased headcounts.
• New orders rose as domestic demand countered a drop in new export orders.
• Input and output price inflation softened, with the rate of input cost inflation dropping to a seven–month low.

June’s flash data revealed falling prices, aligning with inflation data and supporting market bets on more RBA rate cuts. However, upbeat labor market trends and demand sent the AUD/USD pair up from $0.64386 to $0.64432.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Iran escalates the Middle East conflict or dovish RBA signals may drag AUD/USD toward 50-day and 200-day EMAs.
• Bullish AUD/USD Scenario: Easing geopolitical risks or hawkish RBA cues could send AUD/USD toward the June 16 high of $0.65517.

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

Aussie Dollar Daily Outlook: US Private Sector PMIs and Rate Differentials

Later today, the US private sector PMI data will influence US-Aussie interest rate differentials and AUD/USD outlook.

A sharp deterioration in US services sector activity and softer prices may raise bets on a Q3 Fed rate cut, narrowing the rate differential favoring the Aussie dollar. A narrower rate differential may drive AUD/USD toward $0.65 and the June 16 high of $0.65517.

Conversely, a higher Services PMI reading with an uptrend in prices may reduce Q3 2025 Fed rate cut expectations. A less dovish Fed rate path could widen the rate differential, bringing sub-$0.64 levels into play.

Key Market Drivers to Watch Today:

• USD/JPY: Japan’s PMIs, BoJ policy signals, and US-Japan trade headlines.
• USD/JPY and AUD/USD: US PMIs, trade developments, and Iran-Israel war.
• AUD/USD: RBA policy signals and US-China trade headlines.

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