Japanese Yen and Aussie Dollar Forecasts: Rate Differentials on the Move, USD/JPY Eyes 145

Japan’s LEI Signals Pickup in Economic Momentum as Traders Raise Bets on a BoJ Hike

Traders are betting big on a BoJ rate hike as Japan’s economy shows new signs of momentum, pressuring the USD/JPY pair. On Monday, August 25, Japan’s finalized Leading Economic Index (LEI) could support expectations of a Q4 BoJ move toward policy normalization.

According to preliminary data, the LEI rose from 104.8 in May to 106.1 in June. A higher LEI print could paint a rosier picture of Japan’s economy, lifting demand for the Yen. Conversely, a lower reading may cloud the BoJ’s policy outlook, potentially weighing on the Yen.

Why does the Leading Economic Index (LEI) matter?

The LEI considers a range of economic indicators, including consumer confidence, machinery orders, and new job offers. Significantly, a pickup in consumer confidence and rising job offers could support stronger consumer spending.

Given that private consumption accounts for more than 50% of Japan’s GDP, household demand is crucial for the economy. Furthermore, upward trends in private consumption may fuel demand-driven inflation, supporting a more hawkish BoJ rate path.

Beyond the data, traders should closely monitor Bank of Japan commentary following July’s sticky national inflation figures.

USD/JPY Daily Outlook: US Economic Data to Dictate US Dollar Demand

Later in the session on Monday, the Chicago Fed National Activity Index and Dallas Fed Manufacturing Index could influence sentiment toward the US economy.

Economists forecast the Chicago Fed National Activity Index to fall from -0.1 in June to -0.2 in July. Meanwhile, economists expect the Dallas Fed Manufacturing Index to drop from +0.9 in July to +0.2 in August.

Weaker-than-expected numbers may boost expectations of a September Fed rate cut and further policy easing in Q4. A more dovish Fed policy stance could send USD/JPY toward the 50-day Exponential Moving Average (EMA). A drop below 50-day EMA may expose the crucial 145 support level.

On the other hand, stronger figures may drive the pair toward the 200-day EMA, bringing the 149.358 resistance level into sight.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Strong Japanese data, hawkish BoJ signals, weaker US data, or dovish Fed chatter. These factors could push USD/JPY toward 145.
• Bullish USD/JPY Scenario: Weak Japanese data, dovish BoJ chatter, strong US data, or hawkish Fed rhetoric. These factors may drive the pair toward the 150.

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

AUD/USD: Inflation in Focus as Traders Eye a November RBA Rate Cut

Turning to the AUD/USD pair, the RBA cut interest rates this month as inflation cooled. A further easing in inflation could boost expectations of further policy easing in the fourth quarter. On Wednesday, August 27, the Monthly CPI Indicator may affect demand for the Aussie dollar. Economists expect the annual inflation rate to rise from 1.9% in June to 2.2% in July.

A higher-than-expected reading could temper expectations of a Q4 RBA rate cut, lifting the appetite for the Aussie dollar. Conversely, a softer inflation print may bolster bets on further policy easing. This week’s inflation data could be crucial for the AUD/USD pair given Fed Chair Powell’s policy pivot on Friday, August 22. AUD/USD rallied 1.09% to close the session at $0.64898 on Powell hinting at a September rate cut.

When do economists expect the RBA to ease policy further?

AMP Head of Investment Strategy and Chief Economist Shane Oliver projected a November rate cut and further policy easing in H1 2026, 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: Dovish RBA signals and softer inflation. These factors could push AUD/USD toward the 200-day EMA and $0.6450 support level.
• Bullish AUD/USD Scenario: Hawkish RBA rhetoric and hotter inflation. 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: Will US Data Narrow the Rate Differential?

While economists are betting on a November RBA rate cut, support for a September Fed rate cut sent AUD/USD toward $0.65.

Weaker-than-expected US economic data could raise expectations of multiple Fed rate cuts, narrowing the rate differential. A narrower rate differential may push the pair above the 50-day EMA. A break above the 50-day EMA and the $0.65 level may pave the way to the $0.6550 suppot level.

Conversely, stronger-than-expected data could signal a less dovish Fed rate path, potentially widening the rate differential. Under this scenario, AUD/USD could fall toward the 200-day EMA and the $0.6450 support level.

Beyond the data, traders should monitor FOMC members’ comments on the economy, inflation, and monetary policy.

Key Market Drivers to Watch Today:

• USD/JPY: Japanese economic data and BoJ commentary.
• USD/JPY and AUD/USD: US data and Fed speakers.
• AUD/USD: Aussie inflation and RBA chatter.

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