Japanese Yen and Aussie Dollar Forecasts: Japan GDP Tops Estimates, China Data Next

Japan GDP Beat Fuels BoJ Hike Bets – USD/JPY Set for Volatility

Speculation about a Q4 Bank of Japan rate hike intensified on Friday, August 15, as Japan’s economy gained momentum. Sentiment toward the BoJ rate path continues to drive USD/JPY’s near-term direction.

Japan’s economy expanded 0.3% quarter-on-quarter in Q2 after growing 0.1% in the previous quarter. Meanwhile, the economy grew 1% year-on-year, accelerating from 0.6% growth in Q1. Economists had expected QoQ and YoY growth of 0.1% and 0.4%, respectively.

Notably, a rebound in external demand and resilient private consumption contributed to the pickup in economic momentum. External demand rose 0.3% QoQ in Q2, rebounding from a 0.8% drop in Q1. Private consumption increased 0.2% QoQ, mirroring the previous quarter.

Crucially, the pickup in external demand could ease the BoJ’s concerns about US tariffs affecting exports. In July, BoJ board members signaled the need to assess tariff effects on Japan’s economy before resuming rate hikes. Additionally, resilient private consumption, which accounts for over 50% of GDP, also supported a more hawkish BoJ stance.

The USD/JPY pair fell from 147.740 to 147.628 after the data release, reflecting rising bets on a BoJ rate hike.

USD/JPY Daily Outlook: US Retail Sales and Consumer Sentiment in Focus

Later in the session on Friday, retail sales and consumer sentiment figures will influence demand for the US dollar. Economists forecast retail sales to rise 0.5% month-on-month in July, following June’s 0.6% increase. Meanwhile, economists expect the Michigan Consumer Sentiment Index to rise from 61.7 in July to 62 in August.

Higher retail sales and a sharper pickup in consumer sentiment could temper expectations of multiple Fed rate cuts. Rising consumer confidence may indicate a sharper pickup in spending, fueling demand-driven inflation. Under this scenario, the USD/JPY pair could rise above the 200-day EMA. A break above the 200-day EMA may allow the bulls to target the 149.358 resistance level.

On the other hand, softer retail sales and waning sentiment may signal a more dovish Fed policy stance. Rising bets on multiple Fed rate cuts could drag the pair toward the 50-day EMA. A drop below the 50-day EMA may pave the way toward the crucial 145 support level.

Other stats include NY Empire State Manufacturing and industrial production numbers. However, these are likely to play second fiddle to the retail sales and consumer sentiment reports.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Hawkish BoJ signals, weaker US data, or dovish Fed rhetoric could send USD/JPY toward the 50-day EMA. If breached, 145 would be the next key support level.
• Bullish USD/JPY Scenario: Dovish BoJ cues, strong US data, or hawkish Fed chatter may send the pair above the 200-day EMA. A sustained move above the 200-day EMA could bring the 149.358 resistance level into play.

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

AUD/USD: China Economy in the Spotlight

Turning to the AUD/USD pair, markets brace for Chinese economic data, likely to influence the appetite for the Aussie dollar. Retail sales, industrial production, fixed asset investments, and unemployment numbers will provide indications of whether economic momentum continued into the third quarter.

Weaker-than-expected numbers could signal a pullback in demand. Given that China accounts for roughly one-third of Australian export demand and Australia has a trade-to-GDP ratio of over 50%, weaker demand could impact the Aussie economy, the RBA rate path, and the Aussie dollar.

On the other hand, better-than-expected numbers could boost the appetite for the Aussie dollar.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Weaker China data or dovish RBA cues. These factors could push AUD/USD toward the 200-day EMA, potentially exposing the $0.64 level.
• Bullish AUD/USD Scenario: Strong China data or hawkish RBA rhetoric. These factors could send AUD/USD above the 50-day EMA, bringing the $0.6550 resistance level into play.

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

AUD/USD Daily Outlook: Fed Chatter and Rate Differentials

Later today, key US economic indicators will influence AUD/USD and affect US-Australian interest rate differentials.

Hotter-than-expected retail sales and consumer sentiment figures could signal a less dovish Fed rate path. Expectations of fewer Fed rate cuts may widen the rate differential in the US dollar’s favor, pushing AUD/USD toward the 200-day EMA. If breached, the bears could target the crucial $0.64500 support level.

Conversely, softer data may boost expectations of multiple Fed rate cuts, narrowing the rate differential. Under this scenario, AUD/USD could move above the 50-day EMA, bringing the $0.65500 resistance level into sight.

Beyond the data, FOMC members’ reactions to the data and recent inflation figures may also move the dial.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ policy signals.
• USD/JPY and AUD/USD: US economic data and Fed commentary.
• AUD/USD: China data and RBA cues.

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