Japanese Yen and Aussie Dollar Forecasts: Wage Growth to Spotlight the BoJ

Yen in Focus: Wage Growth to Fuel BoJ Rate Hike Bets and USD/JPY Trends

On Monday, July 7, Japan’s wage growth trends may influence Bank of Japan rate hike expectations and the USD/JPY pair. Economists forecast average cash earnings to rise 2.4% year-on-year in May, up from 2% in April, while expecting overtime pay to moderate.

Stronger-than-expected wage growth could signal a pickup in household spending, driving demand-driven inflationary pressures. A higher inflation outlook may raise expectations of a BoJ rate hike, lifting demand for the Yen. Conversely, slower wage growth could signal a less hawkish BoJ stance, weighing on Yen appetite.

Beyond the wage growth data, trade developments remain pivotal. Higher tariffs could impact demand for Japanese goods and the economy, supporting a more dovish policy stance.

Natixis Asia Pacific Chief Economist Alicia Garcia Herror remarked on trade developments, stating:

“Developed Asia (South Korea, Japan, and, to a lesser extent, Taiwan) should continue to meet US demand in electronics, shipbuilding, and high-tech sectors and, therefore, end up with a better deal in the tariff negotiations.”

USD/JPY Daily Outlook: Fed in Focus Post-Fourth July Holidays

Later in the session on Monday, investors should monitor Fed speakers after last week’s labor market data. Their reactions to the Jobs Report and insights into the timeline for a rate cut could influence US dollar demand.

Dovish calls for multiple rate cuts to support the economy will likely pull USD/JPY toward 142.5. Conversely, hawkish cues, favoring delays in policy moves, may fuel US dollar demand, driving the pair toward 145.

On Thursday, July 3, an upbeat US Jobs Report sank bets on a Q3 Fed rate cut. According to the CME FedWatch Tool, the chances of a September Fed rate cut fell from 91.4% on June 27 to 69.4% on July 4. The chances of a September rate cut had peaked at a weekly high of 96% ahead of the US Jobs Report.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: A US-Japan trade deal, strong Japanese wage growth, hawkish BoJ cues, or dovish Fed cues. Such factors could drag USD/JPY toward 142.5.
• Bullish USD/JPY Scenario: Higher US tariffs on Japan, softer Japanese data, dovish BoJ signals, or hawkish Fed chatter. These may push the pair above the 50-day EMA toward 145.

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

AUD/USD: Can Aussie Jobs Data Flip the RBA Outlook?

Meanwhile, Australian labor market data could impact AUD/USD price trends ahead of Tuesday’s RBA interest rate decision. Economists forecast ANZ-Indeed Job Ads to rise 0.2% month-on-month in June after sliding 1.2% in May.

A higher reading could signal an improving labor market, potentially boosting consumer sentiment and spending. A pickup in consumer spending may fuel inflationary pressures, supporting a less dovish RBA stance. However, a further drop in job ads would likely strengthen bets on multiple RBA rate cuts, potentially starting on July 8.

During May’s monetary policy press conference, RBA Governor Michele Bullock stated:

“We have managed to get inflation back while keeping the labor market on a solid footing. 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 frictions, weak Aussie job ads, or dovish RBA cues may push AUD/USD toward the crucial $0.65 support level.
• Bullish AUD/USD Scenario: Easing US-China trade tensions, stronger Aussie labor market 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: Fed to Dictate Rate Differentials

Later today, Fed speakers will continue to influence US-Australian interest rate differentials and AUD/USD trends.

Dovish Fed signals may narrow the rate differential, favoring the Aussie dollar, driving AUD/USD toward $0.66.

Conversely, a more hawkish Fed stance could widen the rate differential, favoring the US dollar. A wider rate differential on falling Fed rate cut bets might push AUD/USD toward $0.65.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ policy signals, Japanese wage growth, and US-Japan trade updates.
• USD/JPY and AUD/USD: Trade headlines and Fed speakers.
• AUD/USD: Aussie labor market data, 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 and consult our economic calendar.