Japanese Yen and Aussie Dollar Forecasts: Household Spending and the Fed in Focus

Yen in the Spotlight: Japan Spending Data and Trade News to Guide BoJ Policy and USD/JPY

On Friday, July 4, Japanese household spending trends could trigger a USD/JPY sell-off. Economists forecast household spending to rise 1.2 year-on-year in May after falling 0.1% in April.

A rebound in household spending could fuel demand-driven inflation. Additionally, a pickup in consumer spending could signal an improving economic backdrop, given private consumption contributes over 50% to Japan’s GDP. These scenarios may signal a more hawkish BoJ stance, pressuring USD/JPY.

On the other hand, another drop in household spending could further dampen BoJ rate hike expectations, sending USD/JPY higher.

Beyond the data, trade developments remain crucial. This week, President Trump warned of higher tariffs on Japanese goods, stating:

“To show people how spoiled Countries have become with respect to the United States of America, and I have great respect for Japan, they won’t take our RICE, and yet they have a massive rice shortage. In other words, we’ll just be sending them a letter, and we love having them as a Trading Partner for many years to come.”

The threat of higher tariffs could overshadow upbeat household spending numbers.

The BoJ has hit a pause on rate hikes to assess the impact of tariffs on external demand and the broader Japanese economy. Higher tariffs may further affect demand for Japanese goods and the economy, supporting a less hawkish BoJ policy stance.

USD/JPY Daily Outlook: Fed in Focus on Fourth of July Holiday

Later in the session on Friday, Fed speakers could give insights into the timelines for a Fed rate cut and affect US dollar demand.

Increasing support for multiple rate cuts to bolster the economy may drag USD/JPY toward 142.5. Conversely, calls to delay further policy easing may drive US dollar demand, sending the pair toward the June 23 high of 148.026.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: A US-Japan trade deal, strong Japanese data, hawkish BoJ signals, or dovish Fed cues. Such factors could send USD/JPY below the 50-day EMA toward 142.5.
• Bullish USD/JPY Scenario: Failed trade talks, weak Japanese data, dovish BoJ cues, or hawkish Fed rhetoric. These may push the pair toward 148.026.

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

AUD/USD: Aussie Household Spending Indicator and the RBA in Focus

Meanwhile, Australian household spending trends could affect AUD/USD price trends and the RBA rate path. Total household spending rose 0.1% month-on-month in April.

A pickup in spending could bolster the Aussie economy and fuel demand-driven inflation. An improving economic backdrop and rising inflation may temper bets on RBA rate cuts, boosting Aussie dollar demand.

Conversely, a drop in household spending may dampen inflation, signaling a more dovish RBA policy stance. Rising expectations of multiple RBA rate cuts may soften demand for the Aussie, weighing on AUD/USD.

During May’s monetary policy press conference, RBA Governor Michele Bullock stated:

“RBA expects lower rates and rising wages to boost household consumption. But spending has not picked up as much as expected. The Australian labor market and household spending remain the most significant domestic risks.”

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: US-China trade tensions, weak Aussie household spending, or dovish RBA signals may push AUD/USD toward the crucial $0.65 support level.
• Bullish AUD/USD Scenario: Easing US-China trade tensions, upbeat Aussie data, or hawkish RBA cues could send AUD/USD toward the $0.66 level.

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

AUD/USD Daily Outlook: Fed to Influence Rate Differentials

Later today, Fed speakers will dictate US-Australian interest rate differentials and AUD/USD trends.

Dovish Fed rhetoric would narrow the rate differential, favoring the Aussie dollar, sending AUD/USD toward $0.66.

Conversely, hawkish Fed cues may widen the rate differential, favoring the US dollar. A wider rate differential, on expectations of fewer Fed rate cuts, might drag AUD/USD toward $0.65.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ commentary, Japanese household spending, and US-Japan trade developments.
• USD/JPY and AUD/USD: Trade headlines and Fed speakers.
• AUD/USD: Aussie household spending, RBA commentary, and US-China trade developments.

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