Japanese Yen & Aussie Dollar Outlook: Key Rate Decisions and Inflation Data Set to Influence Currency Movements

Japanese Yen & Aussie Dollar Forecast: Key Developments Driving Market Trends

Key Highlights:

• Bank of Japan’s (BoJ) potential rate hike in focus; USD/JPY could slide toward 145.
• Australian Dollar (AUD) gains traction ahead of CPI data; Hotter inflation could impact RBA’s next move.
• Speculation around Fed rate cuts and the BoJ’s policy stance drives USD/JPY movements.

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JPY Outlook: BoJ Rate Hike Possibilities Amid Rising Inflation

The Japanese Yen continues to be influenced by evolving economic data and the expectations surrounding the Bank of Japan’s (BoJ) monetary policy decisions. As Japan’s inflation numbers showed signs of persistency above the BoJ’s target, the pressure to tighten policy grows, possibly setting the stage for a rate hike later this year.

• Core Inflation: Japan’s core inflation held steady at 3.4% YoY, surpassing the BoJ’s 2% target, which heightens speculation about a rate hike potentially in Q4.
• Wage Growth: With rising wages across small and medium enterprises (SMEs), the prospect for increased consumer spending may drive demand-driven inflation, adding further pressure for the BoJ to act.

These developments are leading to stronger demand for the Japanese Yen (JPY) as market expectations shift towards a hawkish BoJ stance, influencing the USD/JPY pair.

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USD/JPY: Fed Rate Cut Speculation and BoJ’s Hawkish Signals

The USD/JPY pair saw some weakness as speculation about the Fed’s rate cuts in the upcoming September meeting intensified. Fed Chair Jerome Powell’s dovish signals at Jackson Hole regarding inflationary pressures are weighing on the US Dollar, which contrasts sharply with BoJ’s potential tightening path.

• USD/JPY Technical Analysis: The USD/JPY pair has recently tested resistance levels, with support near 145 as the 50-day Exponential Moving Average (EMA) offers a crucial testing point. If the USD remains under pressure, it could drive USD/JPY toward 145.

The combination of Fed dovishness and BoJ hawkishness is creating a dual pressure on USD/JPY, making this pair ripe for range-bound trading, with key levels at 145 and 149.35.

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AUD/USD: Inflation & Fed Rate Cut Bets to Set the Path

The Australian Dollar (AUD) is benefiting from a hawkish Reserve Bank of Australia (RBA) stance amid inflationary pressures. As Australia’s inflation picks up slightly, the market anticipates RBA rate cuts in November.

• Inflation Data: Australian CPI for July is expected to rise to 2.3%, higher than June’s 1.9%, which could signal a shift in the RBA’s rate-cut expectations and offer support for the Aussie Dollar.
• USD Impact: Speculation around a September rate cut by the Federal Reserve (Fed) is also buoying the AUD/USD pair, as reduced interest rate differentials benefit the Australian currency.

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AUD/USD: Key Levels to Watch as RBA & US Fed Policy Divergence Sets the Tone

• Bearish Scenario for AUD/USD: Softer inflation data or a dovish RBA may pull AUD/USD toward $0.6450.
• Bullish Scenario for AUD/USD: Stronger inflation data or hawkish RBA commentary could push AUD/USD toward $0.6550, potentially opening the path to $0.66.

The AUD/USD pair is poised for range-bound movement, likely bounded by $0.6400 and $0.6600. A breakout from this range will need key economic catalysts like Chinese data, RBA policy guidance, or Fed policy shifts.

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Key Events to Watch:

1. USD/JPY: Monitor BoJ commentary and upcoming Japanese economic data.
2. AUD/USD: Keep an eye on Australia’s CPI release, which could sway RBA expectations.

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