Japanese Yen and Aussie Dollar Forecasts: USD/JPY Holds Gains as Tankan Misses

Bank of Japan Tankan Survey Misses Consensus, Challenging Rate Hike Bets

The Japanese economy and USD/JPY are in the spotlight, with third-quarter Tankan numbers challenging bets on an October Bank of Japan rate hike.

The Tankan Large Manufacturers Index increased from 13 in the second quarter to 14 in the third quarter (forecast: 15). The uptick signaled a slight improvement in business sentiment among large manufacturers. The US-Japan trade agreement likely lifted sentiment. Nevertheless, the upswing may not be enough to convince policymakers to lift rates.

Why Traders Need to Consider the Tankan Survey Results

Third-quarter trends faced more scrutiny, given that policymakers’ concerns about US tariffs impacting the economy despite levies dropping to 15%. In the BoJ’s Summary of Opinions for September, one policymaker referred to the Tankan surveys, stating:

“An examination of the Tankan (Short-Term Economic Survey of Enterprises in Japan) and anecdotal information from firms is required to determine whether firms have maintained their active business stance.”

Another called for a further assessment of upcoming economic data, including the results of the Tankan, before deciding on further policy adjustments.

Meanwhile, the Tankan Large Non-Manufacturing Index remained at 34 in the third quarter, in line with forecasts.

The USD/JPY pair rose from 147.924 to 148.073 after the release of the data, which failed to lift October rate hike bets.

US Labor Market Data and USD/JPY Outlook

Later Wednesday, the ADP’s employment change figures will influence the Fed rate path and US dollar demand. Economists forecast nonfarm payrolls to rise by 50k in September after increasing 54k in August.

A larger-than-expected increase could indicate a resilient labor market and temper expectations of multiple Fed rate cuts in the fourth quarter. A less dovish Fed policy stance may send USD/JPY toward the 149.358 resistance level. A sustained move through 149.358 could bring the August high of 150.917 into play.

Conversely, a lower reading may push the pair toward the 200-day and the 50-day Exponential Moving Averages (EMAs). If breached, 146.5 would be the next key support level.

USD/JPY Scenarios: Hawkish BoJ vs. Dovish Fed Risks

• Bearish USD/JPY Scenario: Hawkish BoJ commentary, weak US labor market data, or dovish Fed rhetoric could push USD/JPY toward 146.5.
• Bullish USD/JPY Scenario: Dovish BoJ comments, strong US data, or hawkish Fed signals could send the pair toward 150.917.

Read the full USD/JPY forecast, including chart setups and trade ideas.

As traders consider the BoJ’s views on the Tankan survey, attention is also turning to the AUD/USD as Aussie inflation and labor market data cloud the RBA’s policy outlook.

Ai Group Industry Index Dips, Spotlighting the Aussie Dollar

Turning focus to the AUD/USD pair, the Ai Group Industry Index fell from -13.9 in August to -16.0 in September, weighing on the Aussie dollar.

The Index provides insights into the economic outlook as survey respondents across the private sector answer questions about employment, new orders, and production.

A softer number could signal weaker demand and a cooling labor market. Rising unemployment may soften wage growth, curbing consumer spending. A pullback in spending may dampen inflation, supporting the case for an RBA rate cut in November.

The AUD/USD pair briefly climbed to $0.66183 before falling to $0.66042 after the softer data.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Dovish RBA chatter and rising trade friction may push AUD/USD toward $0.655.
• Bullish AUD/USD Scenario: Hawkish RBA comments and easing trade tensions could send AUD/USD toward $0.665.

See our full AUD/USD analysis for detailed trends and trade setups.

US Labor Market Data and the Interest Rate Differential

Amid rising uncertainty about a November RBA rate cut, US labor market data could provide greater clarity on Fed policy this week.

A marked increase in nonfarm payrolls may temper bets on an October Fed rate cut. A more hawkish Fed rate path could widen the US-Aussie interest rate differential, favoring the US dollar and pushing AUD/USD toward the 50-day EMA ($0.65556).

On the other hand, a lower print may fuel speculation about multiple Fed rate cuts in the fourth quarter, narrowing the rate differential. A more dovish Fed policy stance could send AUD/USD toward $0.665.

Key Market Drivers to Watch Today:

• USD/JPY: Watch BoJ speeches.
• USD/JPY and AUD/USD: Monitor US labor market data and FOMC members’ speeches.
• AUD/USD: Track trade headlines and RBA signals.

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