Japanese Yen and Aussie Dollar Forecasts: USD/JPY Rallies as Fed and BoJ Decisions Loom

BoJ Decision Looms: Can Economic Data Revive Yen Bulls?

Traders brace for crucial Japanese economic data as the Bank of Japan’s October interest rate decision looms. The USD/JPY rallied 1.02% in the week ending September 26, closing at 149.472. Fading bets on an October BoJ rate hike weakened demand for the yen. However, upcoming economic data could revive expectations of an October interest rate adjustment.

On Monday, September 29, finalized Leading Economic Index (LEI) data could influence the BoJ’s policy stance. According to preliminary data, the Index rose from 105.1 in July to 105.9 in August.

A higher Index reading would signal a positive economic outlook, raising bets on an October BoJ rate hike, boosting demand for the yen. On the other hand, a lower reading may weigh on the yen.

Why Traders Monitor the Leading Economic Index

The LEI provides traders with insights into business and consumer sentiment, which may affect business investment and consumer spending. Rising trends could signal higher wages and an upswing in consumer spending, potentially fueling demand-driven inflation. However, downward trends may affect the labor market and soften wage growth, supporting a less hawkish BoJ rate path.

Though the LEI recovered after its April 2025 low of 104.2, it remains well below the March 2024 all-time high of 112.2.

Fed Speakers and USD/JPY Outlook

Later Monday, FOMC members’ speeches could affect US dollar demand and USD/JPY trends. Fed Vice-Chair John Williams and FOMC members Christopher Waller, Beth Hammack, and Alberto Musalem are on the calendar to deliver speeches.

Comments on the recent GDP, jobless claims, and inflation numbers will provide clues about the timing of Fed rate cuts.

Calls to pause further monetary policy easing to assess labor market and inflation data could send USD/JPY to 150. A sustained move above 150 would bring the August high of 150.917 into play. On the other hand, support for an October rate cut may send the pair below the 149.358 support level. If breached, the 200-day EMA would be the next key technical support level.

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

• Bearish USD/JPY Scenario: Hawkish BoJ rhetoric, stronger Japanese data, or dovish Fed signals could push USD/JPY toward 145.
• Bullish USD/JPY Scenario: Dovish BoJ cues, weaker Japanese data, or hawkish Fed commentary could send the pair toward 150.917.

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

As traders consider a potential BoJ rate hike, attention is also turning to the AUD/USD as Aussie data clouds the RBA’s policy outlook.

RBA Interest Rate Decision Looms, Spotlighting the Aussie Dollar

Turning focus to the AUD/USD pair, speculation about the RBA’s rate path will influence demand for the Aussie dollar. The RBA will announce its interest rate decision on Tuesday, September 30. While economists expect the RBA to maintain its 3.6% cash rate, recent labor market data has boosted bets on a November rate cut.

However, a hotter-than-expected CPI Monthly Indicator, rising from 2.8% in July to 3% in August, has clouded the RBA’s policy outlook. Uncertainty last week sent AUD/USD to a high of $0.66279, signaling potential volatility in the coming sessions.

Trade Tariffs and Policy Implications

While labor market and inflation data are crucial for the RBA, trade developments could also affect the RBA’s policy stance. Last week, President Trump announced a fresh wave of tariffs, targeting pharmaceuticals, bathroom vanities, heavy trucks, kitchen cabinets, and upholstered furniture. The latest tariff announcements suggested that tariff threats remain and could potentially weigh on the Aussie dollar.

Why AUD/USD Traders need to Monitor Tariff Developments

RBA Governor Michele Bullock recently remarked on the potential impact of tariffs on the Aussie economy. She reportedly stated that the effect of tariffs on China and other Aussie trade partners could affect the Aussie economy, adding:

“What that means for Australia is not 100 per cent clear… the extent to which [our partners] are impacted by the change in the world trading order… does that impact their growth, and therefore, does that impact us?”

Dr. Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, downplayed the potential impact of pharmaceutical tariffs on the Aussie economy. However, on inflation, Dr. Oliver commented:

“With inflation showing signs of stickiness above target this has led to concerns that the RBA may not be able to cut much more if at all.”

Despite the upswing in inflation, he warned against reading too much into the Monthly CPI Indicator, stating:

“The monthly CPI is volatile and goes through hot & cold patches and as we have seen since 2022 and in other countries the fall back in inflation can be quite bumpy. In fact, compared to other similar countries we are doing pretty well. […] More monthly CPI items are continuing to see inflation rates below 2% yoy than above 3% yoy.”

A limited direct or indirect effect of tariffs on the Aussie economy, coupled with softer inflation, nearing the middle of the RBA’s 2-3% target range, would support multiple rate cuts.

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Dovish RBA signals and rising trade tensions may push AUD/USD toward $0.65.
• Bullish AUD/USD Scenario: Hawkish RBA rhetoric and easing trade friction could drive AUD/USD toward $0.66.

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

Fed Speakers and the Interest Rate Differential

Economists continue to price in a November RBA rate cut, with further policy easing, potentially in February and May. However, upcoming Fed speeches could influence the US-Aussie interest rate differential and AUD/USD trends.

Hawkish Fed speakers, downplaying an October Fed rate cut, could widen the rate differential, favoring the US dollar. A more hawkish Fed rate path may push AUD/USD toward $0.65. On the other hand, rising support for multiple Fed rate cuts in the fourth quarter could send the pair toward $0.66. A sustained move above $0.66 could pave the way toward the September 17 high of $0.67071.

Key Market Drivers to Watch Today:

• USD/JPY: Watch BoJ commentary and Japanese economic data.
• USD/JPY and AUD/USD: Monitor FOMC members’ speeches.
• AUD/USD: Track trade developments and RBA commentary.

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