Japanese Yen and Aussie Dollar Forecasts: Trade Talks and Aussie GDP in Focus

Jibun Bank Services PMI Tests BoJ Rate Hike Bets

On Wednesday, June 4, Japan’s services sector will be under the spotlight, influencing Japanese Yen demand and USD/JPY trends. According to the flash survey, the Jibun Bank Services PMI dropped from 52.4 in April to 50.8 in May.

Given services account for over 70% of Japan’s GDP, a downward revision to below the neutral 50 level could retrigger recession concerns. A weaker economic outlook may sink bets on a 2025 Bank of Japan rate hike, impacting Japanese Yen demand.

Conversely, a higher PMI reading could raise bets on a Q3 2025 BoJ policy move, boosting Yen appetite.

May’s flash PMI figures suggested Japan’s economy lost momentum in May as the Jibun Bank Composite PMI dropped from 51.2 to 49.8 in May, supporting lower expectations of a 2025 BoJ rate hike. In Reuters’ latest Poll, conducted between May 7-13:

• 39 of 58 (67%) predict the BoJ will maintain the policy status quo in Q3 2024, up from just 36% in the April survey.
• 52% forecast a 25-basis-point rate hike in 2025.

Beyond the PMI data, trade-related updates remain a key driver. Renewed trade tensions may trigger a flight for safety, boosting Yen demand, while easing trade tensions may send USD/JPY higher.

USD/JPY Daily Outlook: The Fed and Manufacturing in Focus

Later in the session, the ISM Services PMI and ADP Employment Change numbers will influence US dollar demand and USD/JPY trends. Economists forecast the ADP to report employment to increase 115k in May, up from 62k in April. Meanwhile, economists expect the ISM Services PMI to rise from 51.6 in April to 52 in May.

Rising employment may drive wage growth and consumer spending, fueling inflationary pressures. A higher inflation outlook, combined with an upswing in services sector activity, may delay Fed rate cuts, sending USD/JPY toward 145 and the 50-day Exponential moving average (EMA).

Conversely, a lower PMI print and a smaller employment rise could revive bets on a Q3 Fed rate cut, potentially dragging USD/JPY toward the 140.309 support level.

Beyond the data, traders should track Fed commentary. Views on inflation, the labor market, and trade developments could impact US dollar appetite.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Rising trade tensions, hawkish BoJ cues, weaker US data, or dovish Fed rhetoric could drag USD/JPY toward 140.309.
• Bullish USD/JPY Scenario: Easing trade friction, dovish BoJ signals, upbeat US data, or hawkish Fed cues may lift the pair toward 145.507.

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

AUD/USD in Focus: GDP Data Crucial for the RBA

Also scheduled for June 4, Aussie GDP numbers will influence the RBA rate path and AUD/USD trends. Economists forecast the economy to expand 0.4% quarter-on-quarter in Q1 2025, slowing from 0.6% growth in the previous quarter.

Slower-than-expected growth may bolster bets on multiple RBA rate cuts, potentially pushing AUD/USD toward $0.64. Conversely, a higher GDP print could signal a less dovish RBA rate path, driving the pair toward $0.65 and the May 26 high of $0.65370.

During May’s RBA press conference, RBA Governor Michele Bullock highlighted potential risks to the Aussie economy, stating:

“The Australian labor market and household spending remain the most significant domestic risks.”

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, remarked on Tuesday’s RBA meeting minutes:

“RBA mins were dovish. The RBA opted for a 0.25% cut rather than 0.5% to be cautious & predictable but it stressed commitment to both infl & full emp objectives & indicated it was well placed to respond to trade war threat. Our base case is for the next cut in Aug but Jul is live.”

AUD/USD: Key Scenarios to Watch

• Bearish Aussie dollar Scenario: Weaker GDP or dovish RBA cues may push AUD/USD below the 200-day Exponential Moving Average (EMA) toward $0.64.
• Bullish Aussie dollar Scenario: Stronger GDP growth or hawkish RBA signals could send the pair toward $0.65 and potentially retest the May 26 high of $0.65370.

Click here for a more comprehensive analysis of AUD/USD trends and trade data insights.

Aussie Dollar Daily Outlook: US Labor Market and Services in Focus

Later today, US services sector and labor market data will affect US-Aussie interest rate differentials and AUD/USD. Better-than-expected labor market and services sector data would likely widen the US-Aussie interest rate differential in favor of the US dollar. A widening rate differential may pull AUD/USD below the 200-day EMA and $0.64. Increased selling pressure could potentially bring the $0.63623 support level into play.

Conversely, softer data may narrow the rate differential and drive AUD/USD above $0.65 toward $0.65370.

Beyond the economic data, trade developments and Fed signals will continue to drive price volatility.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ policy outlook, Japan Services PMI data, and trade talks.
• USD/JPY and AUD/USD: Fed cues, US economic data, and trade headlines.
• AUD/USD: Aussie GDP data, RBA rate cut bets, and China’s policy direction.

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