Japanese Yen and Aussie Dollar Forecasts: Tariffs, the BoJ, and China Trade Data in Focus

Japan Machinery Orders and Trade Talks in Focus

On Monday, July 14, machinery orders will give insights into the demand environment, influencing the USD/JPY pair. Economists forecast machinery orders to drop 1.5% month-on-month in May after plunging 9.1% in April.

A sharper fall in orders could signal deteriorating business sentiment, potentially impacting the labor market and wage growth. Softer wage growth may dampen consumer spending and demand-driven inflation. A softer inflation outlook would likely support a more dovish Bank of Japan policy outlook, pressuring the Yen. Conversely, a stronger reading may indicate improving sentiment and increase demand for the Yen.

Trade developments have impacted sentiment across export-focused sectors, including auto and steel. Trump’s 25% tariff on Japanese goods, effective August 1, may further weaken sentiment if Japan fails to reach a trade deal.

Higher tariffs and weakening trade terms with the US could close the door on a 2025 BoJ rate hike, impacting the Yen. On the other hand, a trade deal may revive expectations of further policy tightening.

USD/JPY Daily Outlook: Fed Commentary to Fuel Policy Speculation

Later in the session on Monday, traders should track Fed chatter for clues on the timing of a Fed interest rate cut. President Trump’s latest tariff letters impacted the chances of a Q3 Fed rate cut. According to the CME FedWatch Tool, the probability of a September rate cut fell from 68.1% on July 3 to 60.4% on July 11.

Fed concerns about tariffs triggering inflationary pressures could fuel US dollar demand, sending USD/JPY toward the 200-day Exponential Moving Average (EMA) and the July high of 148.026. Conversely, growing support for policy easing to bolster the economy may push the pair toward the 50-day EMA and the crucial 145 support level.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Easing US-Japan trade tensions, strong Japanese data, hawkish BoJ cues, or dovish Fed rhetoric. Such factors could drag USD/JPY toward the 50-day EMA and the 145 level.
• Bullish USD/JPY Scenario: Stalled US-Japan trade talks, weak Japanese data, dovish BoJ chatter, or hawkish Fed signals. These may push the pair toward the 200-day EMA and 148.026.

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

AUD/USD: China Trade Terms to Spotlight the RBA

Meanwhile, trade data from China would likely fuel speculation about an RBA rate cut, influencing the AUD/USD pair. Economists expect exports to rise 5% year-on-year in June, up from 4.8% in May, while forecasting imports to increase 1.3% (May: -3.4%).

A pickup in demand for Chinese goods and rising domestic demand could raise the appetite for the Aussie dollar. However, weaker trade terms may fuel speculation about an August RBA rate cut, pressuring the Aussie dollar.

Last week, RBA Governor Michele Bullock emphasized the importance of China’s economy, stating that trade terms with China remain crucial. The RBA Governor added:

“If China bolsters its economy with fiscal stimulus, that could cushion the impact of tariffs on Australia’s economy.”

Australia has a trade-to-GDP ratio of over 50%, with China accounting for around one-third of Aussie exports.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Escalation in US-China trade friction, weaker China trade data, or Beijing’s silence on stimulus. These factors may pull AUD/USD toward the $0.65 support level.
• Bullish AUD/USD Scenario: Progress toward a US-China trade deal, strong trade data from China, or more policy stimulus from Beijing could drive 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 Speakers to Dictate Rate Differentials

Later today, Fed commentary would likely drive US-Australian interest rate differentials and AUD/USD trends.

Dovish Fed cues, favoring a September rate cut, could narrow the rate differential, favoring the Aussie dollar and supporting an AUD/USD move toward $0.66.

Conversely, hawkish rhetoric may widen the rate differential, favoring the US dollar. A wider rate differential could drag the pair toward $0.65.

Key Market Drivers to Watch Today:

• USD/JPY: Japanese economic data, BoJ policy commentary, and US-Japan trade talks.
• USD/JPY and AUD/USD: Trade headlines and Fed speakers.
• AUD/USD: US-China trade developments, Chinese trade data, and Beijing’s stimulus moves.

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