Japanese Yen and Aussie Dollar Forecasts: Trade News, China PMIs, and the Fed in Focus

Industrial Production and US-Japan Trade Developments to Drive USD/JPY Trends

On Monday, June 30, key economic data from Japan and trade headlines will fuel Bank of Japan rate hike bets and USD/JPY trends. Economists forecast industrial production to rise 0.3% year-on-year in May, slowing from a 0.5% increase in April.

A lower industrial production reading may reflect the impact of US tariffs on demand for Japanese goods. Given Japan’s trade-to-GDP ratio is around 50%, weaker demand may impact the economy and temper BoJ rate hike bets. Conversely, a higher print may fuel speculation about a Q3 BoJ policy move.

Last week, the BoJ’s Summary of Opinions and board member Tamura Naoki kept rate hike hopes alive. Tamura saw inflation accelerating more than the Bank’s May projection, with service sector firms potentially beginning to pass rising labor costs on to consumers. He concluded,

“If upward inflation risks heighten, the BOJ may need to act decisively as a guardian of price stability.”

The Bank’s Summary of Opinions 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.”

However, US-Japan trade developments could be crucial in swaying more dovish policymakers. BoJ Governor Kazuo Ueda called for caution against raising rates too early, citing heightened uncertainty about US trade policies.

USD/JPY Daily Outlook: US Manufacturing and the Fed in Focus

During the US session, the Chicago PMI and the Dallas Fed Manufacturing Index would likely influence Fed sentiment and US dollar demand.

Slower contractions across Chicago’s private sector and Dallas’ manufacturing sector may ease fears of a US recession, sending USD/JPY toward 145. However, unless there are sharp increases in the numbers, Monday’s reports are unlikely to derail expectations of a Fed rate cut, limiting USD/JPY gains. Meanwhile, weaker readings may drag the pair toward 142.5.

Investors should also monitor Fed speakers. Growing support for further monetary policy easing would pressure USD/JPY.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: A US-Japan trade deal, upbeat Japanese data, weaker US data, hawkish BoJ signals, or dovish Fed cues. Such factors could send USD/JPY toward 142.5.
• Bullish USD/JPY Scenario: Stalled trade talks, weak Japanese data, strong US numbers, dovish BoJ chatter, or hawkish Fed signals. These may push the pair toward 148.026.

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

AUD/USD in Focus: China Economy to Drive RBA Rate Path

Meanwhile, Chinese economic data will influence AUD/USD trends. Economists forecast China’s NBS Manufacturing PMI to rise from 49.5 in May to 49.7 in June while expecting the Non-Manufacturing PMI to remain unchanged at 50.3.

The Aussie dollar could get a boost if the Manufacturing PMI moves above the 50 neutral rate. An expanding manufacturing sector could signal an improving demand environment. Since China accounts for around one-third of Aussie exports, rising demand would bolster the economy and support the Aussie dollar.

On the other hand, a weaker print could potentially support a more dovish RBA policy stance, pressuring AUD/USD. During the May press conference, RBA Governor Michele Bullock remarked on China’s influence on monetary policy, stating:

“Australia’s economy could easily be compromised if a trade war between the US and China escalates. Depending on where we end up on trade developments, there might be more interest rate adjustments. But for now, rates are in the right place.”

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: US-China trade tensions or weaker China data may drag AUD/USD toward the crucial $0.65 support level.
• Bullish AUD/USD Scenario: A balanced US-China trade deal, or better-than-expected Chinese data, 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 Data and the Fed to Drive Rate Differentials

Later today, the US private sector data and Fed speakers will influence US-Australian interest rate differentials and AUD/USD trends.

Weaker-than-expected data and dovish Fed commentary would fuel Q3 Fed rate cut bets, narrowing the rate differential favoring the Aussie dollar. This could send AUD/USD toward $0.66.

Conversely, better-than-expected US data and hawkish Fed cues may widen the rate differential favoring the US dollar. Widening rate differentials on reduced Fed rate cut bets may drag AUD/USD toward $0.65, exposing the 50-day and 200-day Exponential Moving Averages (EMA).

Key Market Drivers to Watch Today:

• USD/JPY: Japan’s economic data, BoJ commentary, and US-Japan trade headlines.
• USD/JPY and AUD/USD: US data, trade developments, and geopolitical risks.
• AUD/USD: China private sector data and US-China trade headlines.

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