Japanese Yen and Aussie Dollar Forecasts: Japan Wage Growth Bolsters Rate Hike Bets

Japan Wage Data Misses Forecast – Is a BoJ Hike Still on the Table?

Wage growth trends are a crucial driving force for the Bank of Japan’s policy stance. On Wednesday, August 6, average cash earnings could influence the timeline for a BoJ rate hike and the USD/JPY pair’s price outlook.

Average cash earnings rose 2.5% year-on-year in June, accelerating from May’s 1.4% rise, but falling short of an expected 3.2% jump. Nevertheless, rising wages may boost household spending and fuel demand-driven inflation. A higher inflation outlook could raise expectations of a BoJ policy move.

The USD/JPY pair briefly rose from 147.571 to 147.637 before dropping to a low of 147.564 after the release of the data.

On Friday, August 9, June’s household spending figures will provide insights into whether consumers are loosening their purse strings on higher wages.

Beyond this morning’s data, investors should closely monitor BoJ commentary ahead of the Bank’s Summary of Opinions release on August 9.

USD/JPY Daily Outlook: Fed in Focus

Later in the session on Wednesday, Fed speakers could influence risk sentiment. Rising support for a September Fed rate cut and further policy easing in Q4 may weigh on the US dollar.

A more dovish Fed rate path could push USD/JPY toward the 50-day EMA, potentially exposing the crucial 145 level. Conversely, hawkish rhetoric may boost the appetite for the US dollar, sending the USD/JPY pair toward the 200-day EMA.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: hawkish BoJ cues or dovish Fed chatter. Such factors could send USD/JPY toward the 50-day EMA, bringing the 145 level into sight.
• Bullish USD/JPY Scenario: Dovish BoJ guidance or hawkish Fed signals. These may drive the pair toward the 200-day EMA and potentially the 149.358 resistance level.

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

AUD/USD: Aussie Ai Group Industry Index in Focus

Turning to the AUD/USD pair, Australia’s Ai Group Industry Index could affect sentiment toward the economy and the RBA’s policy stance. The Index increased to -3.2 in July, up from -11.9% in June. Economists had expected the Index to rise to -8.9.

A smaller contraction than expected could signal an improving Australian economy, easing bets on multiple RBA rate cuts. A less dovish RBA rate path could bolster demand for the Aussie dollar. The AUD/USD pair briefly dropped to a low of $0.64690 before rising to a high of $0.64753 in response to the data.

According to the July survey, key highlights included:

• Rising input costs and wages signaled inflation risks. However, sales prices fell.
• Demand improved, with the new orders index rising 6.8 points to -4.9.
• However, the employment index declined slightly to -4.0.

Economists consider the Ai Group Industry Index a barometer for the Aussie economy. The index considers survey responses from companies across key sectors, including services, manufacturing, and mining. The Index comprises components such as employment and new orders.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Weaker-than-expected Aussie data or dovish RBA cues. These factors could push AUD/USD toward the 200-day EMA, bringing the 0.64 support level into play.
• Bullish AUD/USD Scenario: Positive Aussie data or hawkish RBA rhetoric. These factors could drive AUD/USD toward the 50-day EMA and the crucial $0.65 resistance level.

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

AUD/USD Daily Outlook: The Fed and Rate Differentials

Later today, Fed chatter will likely influence Fed rate cut expectations and US-Australian interest rate differentials.

Hawkish Fed policy commentary, supporting a delay to rate cuts, would widen the rate differential in favor of the US dollar, pushing AUD/USD toward the 200-day EMA. A break below the 200-day EMA may pave the way to the $0.64 level.

On the other hand, calls to cut interest rates by 50 basis points and hints of further policy easing would narrow the rate differential. A narrower rate differential could drive AUD/USD toward the 50-day EMA and the $0.65 resistance level. A sustained break above the $0.65 level may bring the July high of $0.6625 into play.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ commentary.
• USD/JPY and AUD/USD: Fed guidance.
• AUD/USD: RBA rhetoric

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