USD/JPY and AUD/USD Forecast: Central Bank Policies and US Sentiment in Focus

The Japanese Yen and Australian Dollar remain under pressure amid shifting economic data and central bank expectations. As markets await key US consumer confidence data, traders brace for further volatility in USD/JPY and AUD/USD.

Japanese Yen Outlook: Inflation Cools, BoJ Cautious

Japan’s inflation eased in June, with the headline CPI falling to 3.3% from 3.5%, while core-core inflation—excluding food and energy—ticked higher to 3.4%. This mixed data fuels speculation about a potential 2025 rate hike by the Bank of Japan (BoJ). Still, concerns over US trade tariffs and a fragile domestic economy suggest the BoJ may adopt a wait-and-see stance at its July meeting.

Meanwhile, the Japanese Yen continues to weaken as investors reduce expectations for imminent policy tightening. A looming 25% US tariff on Japanese exports remains a major headwind for the JPY.

USD/JPY Forecast: Eyes on US Sentiment and Fed Commentary

Later today, the Michigan Consumer Sentiment Index is set to offer fresh clues about US economic momentum. A stronger reading could dampen expectations for a Fed rate cut, boosting the US Dollar and potentially driving USD/JPY toward the 149.35 resistance zone.

However, if consumer sentiment weakens, markets may shift toward a more dovish Fed outlook—likely sending the pair down to test support near the 200-day EMA.

Key USD/JPY Scenarios:

• Bullish: Strong US sentiment, stalled US-Japan trade talks, or dovish BoJ could lift USD/JPY above 149.35.
• Bearish: A US-Japan deal, weak US data, or hawkish BoJ rhetoric may push the pair toward 147.50 and below.

AUD/USD Analysis: Weak Jobs Data Fuels RBA Cut Expectations

The Australian Dollar dropped 0.60% on July 17 as June’s labor report disappointed. The unemployment rate rose unexpectedly to 4.3%, increasing pressure on the Reserve Bank of Australia (RBA) to ease policy. Markets now see a strong chance of an August rate cut.

RBA Governor Michele Bullock has emphasized that further easing depends on upcoming CPI data. However, deteriorating labor market conditions and sluggish inflation may push the central bank toward multiple cuts this year.

AUD/USD and China Outlook: Trade and Stimulus in Focus

China’s Q2 performance slightly exceeded expectations, but soft retail sales and a cloudy trade outlook could hurt Australian exports. With China accounting for nearly one-third of Australia’s exports, any slowdown poses a risk to the AUD.

Economists expect further Chinese stimulus measures, though likely gradual rather than aggressive. A lack of bold action may limit AUD upside, especially if US-China trade tensions escalate.

Key AUD/USD Scenarios:

• Bullish: A strong US-China deal or increased Chinese stimulus could lift AUD/USD toward 0.6550.
• Bearish: Rising trade tensions or more dovish RBA signals may drive the pair below key EMAs, exposing 0.6400 support.

Final Thoughts: Sentiment Data May Set the Tone

Traders are closely watching today’s US Michigan Consumer Confidence data. A strong reading could strengthen the USD across the board, weighing on both JPY and AUD. Meanwhile, central bank cues from the Fed, BoJ, and RBA remain the main drivers for directional moves in USD/JPY and AUD/USD.

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