Japanese Yen and Aussie Dollar Forecasts: Inflation and Policy Divergence Loom

Japan Tertiary Industry Index in Focus

Japan’s Q2 GDP numbers fueled speculation about a Q4 Bank of Japan rate hike. On Monday, August 18, tertiary industry-related data could influence demand for the Japanese Yen and USD/JPY trends.

Economists expect the Tertiary Industry Index to rise 0.3% month-on-month in June after increasing 0.6% in May.

A higher reading could indicate a sharper pickup in economic momentum in Q2 and upward revisions to the prelim GDP data. The BoJ may signal a near-term interest rate hike if the economy gathers pace. On the other hand, weaker data may temper bets on a BoJ rate hike, weighing on appetite for the Yen.

Why is the Tertiary Industry Index important for the BoJ? The tertiary sector considers the services sector, accounting for roughly 70% of Japan’s GDP.

USD/JPY Daily Outlook: Fed Speakers to Fuel Fed Rate Cut Bets

Later in the session on Monday, FOMC members’ reactions to last week’s US economic data will be crucial.

Calls to delay monetary policy easing to better assess the impact of tariffs on inflation could sink Fed rate cuts. A less dovish Fed rate path may drive USD/JPY toward the 200-day Exponential Moving Average (EMA). A break above the 200-day EMA could bring the 149.358 resistance level into play.

However, support for further policy easing to bolster the labor market may pave the way to the 50-day EMA. A break below the 50-day EMA would expose the crucial 145 support level.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Upbeat Japanese data, hawkish BoJ rhetoric, or dovish Fed rhetoric. These factors could push USD/JPY toward the 50-day EMA, bringing the 145 level into sight.
• Bullish USD/JPY Scenario: Dovish BoJ signals, weak Japanese data, or hawkish Fed rhetoric. These factors may send the pair above the 200-day EMA, supporting a move toward the 149.358 resistance level.

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

AUD/USD: Consumer Inflation Expectations to Spotlight the RBA

Turning to the AUD/USD pair, investors brace for crucial inflation data. Economists forecast Australian consumer inflation expectations to fall from 4.7% in July to 4.4% in August.

Softer consumer inflation expectations could dampen spending, as households may delay purchases in anticipation of lower prices. Weaker consumer spending may cool inflation, supporting a more dovish RBA rate path, weighing on demand for the Aussie dollar. On the other hand, an unexpected rise in consumer inflation expectations could boost spending, lifting the Aussie dollar.

The RBA cut the cash rate by 25 basis points to 3.6% on August 12 as inflation continued to soften.

AMP Head of Investment Strategy and Chief Economist Shane Oliver signaled further RBA rate cuts, stating:

“We continue to see the RBA cutting rates again in November, February and May taking the cash rate down to 2.85%.”

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Softer consumer inflation expectations or dovish RBA rhetoric. These factors could push AUD/USD below the 50-day EMA, potentially exposing the 200-day EMA.
• Bullish AUD/USD Scenario: Hotter consumer inflation expectations or hawkish RBA signals. These factors could send AUD/USD toward the $0.6550 resistance level.

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

AUD/USD Daily Outlook: Fed Policy Signals and Rate Differentials

Later today, Fed speakers will be in focus ahead of the Jackson Hole Symposium. Recent US economic data have gyrated Fed rate cut bets and US-Aussie rate differentials.

Hawkish Fed rhetoric, supporting a delay to interest rate cuts, would widen the rate differential in favor of the US dollar. Widening rate differentials could drag AUD/USD below the 50-day EMA. A drop below the 50-day EMA may pave the way to the 200-day EMA and the $0.64500 support level.

Conversely, rising support for a September Fed rate cut and further policy easing in Q4 would narrow the rate differential. Under this scenario, AUD/USD could move toward the $0.6550 resistance level.

Key Market Drivers to Watch Today:

• USD/JPY: Tertiary Industry Index trends and BoJ policy guidance.
• USD/JPY and AUD/USD: Fed commentary.
• AUD/USD: Aussie consumer inflation expectations and RBA signals.

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