USD/JPY Forecast: Japan’s Wage Data and Fed Policy Outlook in Focus
In the latest updates, Japan’s wage growth has seen a significant boost, with average cash earnings rising by 2.5% year-on-year in June. While this marks a notable acceleration from May’s 1.4% growth, it fell short of the anticipated 3.2% rise, sparking mixed reactions in the market. The increase in wages could bolster household spending, further fueling demand-driven inflation—potentially influencing the Bank of Japan’s (BoJ) policy stance.
In the USD/JPY pair, we saw a brief spike from 147.571 to 147.637 before the price dipped to 147.564 after the data release. As traders digest this information, the BoJ’s upcoming Summary of Opinions, due on August 9, could offer clearer signals on the central bank’s next moves.
Key Scenarios for USD/JPY:
- Bullish USD/JPY: Should the Fed maintain a more hawkish stance, especially with upcoming rate cut expectations potentially pushed back, the USD/JPY could target the 200-day EMA and move toward the 149.358 resistance level.
- Bearish USD/JPY: If the BoJ adopts a more aggressive stance or the Fed embraces dovish commentary, the pair could test the 50-day EMA and target the 145 level.
This week’s US Federal Reserve speakers will be pivotal in shaping the direction of USD/JPY, with comments potentially moving the pair depending on whether the Fed signals further rate cuts or delays.
AUD/USD Forecast: Aussie Data Improves, RBA Rate Cut Bets Ease
Turning to the AUD/USD pair, Australia’s Ai Group Industry Index surprised the market with a rise to -3.2 in July from -11.9% in June. This improvement signals a resilient Australian economy, alleviating concerns that the Reserve Bank of Australia (RBA) may continue aggressively cutting rates. A less dovish RBA outlook could boost the Australian Dollar as traders price in a delay or reduction in the number of expected rate cuts.
The AUD/USD pair briefly dipped to $0.64690 before recovering to $0.64753, in response to the improving Ai Group data. This index, which surveys manufacturing, mining, and services sectors, is closely watched for signs of economic health.
Key Scenarios for AUD/USD:
- Bullish AUD/USD: Should positive Australian data continue or if the RBA takes a more hawkish tone, the pair may rise towards the 50-day EMA and the $0.65 resistance level. A sustained breakout could target the July high of $0.6625.
- Bearish AUD/USD: Weaker-than-expected Australian data or dovish RBA cues could push the pair towards the 200-day EMA, with the $0.64 support level in focus.
USD/JPY and AUD/USD Outlook: Focus on Fed’s Next Move and Rate Differentials
Later today, Fed commentary will be critical in shaping rate cut expectations and the USD-AUD interest rate differential. Hawkish rhetoric from the Fed may widen the gap between US and Australia’s interest rates, favoring USD/JPY and potentially pushing AUD/USD lower.
Conversely, calls for aggressive rate cuts and dovish signals from the Fed would narrow the USD-AUD rate differential, potentially driving AUD/USD higher. A key level to watch for the AUD/USD is the $0.65 resistance, while the $0.64 support remains critical for further downside movement.
In Summary:
- USD/JPY remains sensitive to BoJ and Fed cues, with wage growth in Japan potentially fueling expectations of a BoJ rate hike.
- AUD/USD shows resilience, supported by stronger-than-expected data from Australia, reducing the likelihood of further RBA rate cuts.
- The next few days will be crucial as the Fed weighs in with further statements, potentially altering rate cut expectations and impacting the USD and Aussie Dollar alike.
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