Japanese Yen and Aussie Dollar Forecasts: Trade Headlines, Aussie Retail Sales in Focus

Japan Trade Developments and the BoJ in Focus

On Wednesday, July 2, USD/JPY trends will hinge on US-Japan trade developments and Bank of Japan rhetoric.

Progress toward a US-Japan trade deal ahead of Trump’s July 9 tariff-truce deadline could lift expectations of a Q3 BoJ rate hike. A more hawkish BoJ stance would likely boost Yen demand, pressuring USD/JPY. Conversely, stalled trade talks could weaken external demand and economic momentum. Weaker demand for Japanese goods may leave the BoJ in a policy-holding pattern, weighing on Yen appetite.

Export price trends in Japan’s auto sector underscored the toll of US tariffs. The Kobeiissi Letter reported,

“Japan’s passenger car export prices to North America dropped -12% M/M in May, the largest decline on record. This follows a -4.5% decrease in April, driven by the 25% US tariff imposed on auto imports from Japan. Meanwhile, total export prices in yen terms fell -0.7% M/M in May, marking the 3rd-straight monthly decline. Japanese automakers are absorbing US tariffs to stay competitive.”

Narrow margins may strain Japan’s labor market, slow wage growth, and dampen consumer sentiment. Given that private consumption contributes over 50% to the GDP, waning consumer sentiment could weigh on Japan’s economy.

The Bank’s Summary of Opinions from the June meeting stated,

“If its outlook for economic activity and prices will be realized, the Bank, in accordance with improvement in economic activity and prices, will continue to raise the policy interest rate and adjust the degree of monetary accommodation.”

Deteriorating trade terms and stalled negotiations may further dampen BoJ rate hike bets.

USD/JPY Daily Outlook: US Labor Market in Focus

During the US session, the ADP’s employment change report could influence the Fed rate path and US dollar demand. Economists expect the ADP to report employment to rise 85k in June, up from 37k in May.

A stronger-than-expected reading would point to improving labor market conditions, potentially lifting wage growth. Higher wages may fuel consumer spending and demand-driven inflation, sending USD/JPY toward 145 and the 50-day EMA. In contrast, a weaker report could fuel speculation about multiple H2 2025 Fed rate cuts, pushing the pair toward 142.5.

Investors should also track Fed commentary. Rising calls for rate cuts would pressure USD/JPY.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: A US-Japan trade deal, weaker US labor market data, hawkish BoJ cues, or dovish Fed signals. Such factors could send USD/JPY toward 142.5.
• Bullish USD/JPY Scenario: Failed trade talks, solid US labor market data, dovish BoJ cues, or hawkish Fed rhetoric. These may push the pair toward 145 and the 50-day EMA.

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

AUD/USD in Focus: Aussie Retail Sales and the RBA

Meanwhile, Australian retail sales data will influence sentiment toward RBA policy and AUD/USD price trends. Economists forecast retail sales to rise 0.3% month-on-month in May, reversing a 0.1% fall in April.

A sharp pickup in retail sales could ignite inflation concerns, supporting a less dovish RBA rate path. Falling bets on multiple RBA rate cuts would bolster Aussie dollar demand, sending AUD/USD higher. However, an unexpected drop in retail sales may signal a more dovish RBA policy stance.

RBA Governor Michele Bullock, in May’s press conference, emphasized:

“RBA expects lower rates and rising wages to boost household consumption. But spending has not picked up as much as expected. The Australian labor market and household spending remain the most significant domestic risks.”

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: US-China trade friction, weak Aussie retail sales, or dovish RBA cues. These factors may push AUD/USD toward the crucial $0.65 support level.
• Bullish AUD/USD Scenario: Easing US-China trade tensions, upbeat Aussie data, or hawkish RBA signals could send 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: US Labor Market and the Fed to Drive Rate Differentials

Later today, the ADP employment report and Fed speakers will dictate US-Australian interest rate differentials and AUD/USD sentiment.

Weaker labor market data and dovish Fed comentary would narrow the rate differential favoring the Aussie dollar. This could send AUD/USD toward $0.66.

Conversely, better-than-expected US numbers and hawkish Fed signals may widen the rate differential favoring the US dollar. A wider rate differential on a less dovish Fed policy stance may pull AUD/USD toward $0.65.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ commentary and US-Japan trade developments.
• USD/JPY and AUD/USD: US labor market data, trade headlines, and geopolitical risks.
• AUD/USD: Aussie retail sales, RBA rhetoric, and US-China trade headlines.

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