Japanese Yen and Aussie Dollar Forecasts: All Eyes on Inflation Data and Powell’s Testimony

Key Highlights:

• Bank of Japan remains cautious as inflation slows; traders await Board Member Tamura’s speech
• Aussie Dollar in focus as May CPI expected to cool; weaker print could trigger RBA rate cut bets
• Fed Chair Powell’s testimony may shift momentum for USD/JPY and AUD/USD amid easing bias

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USD/JPY Outlook: BoJ Policy Uncertainty and Powell in the Spotlight

The Japanese Yen showed muted movement early Wednesday after the Bank of Japan’s (BoJ) Summary of Opinions hinted at a cautious stance. The board cited downside risks to inflation and warned of potential trade policy headwinds, suggesting that the central bank may hold rates at 0.5% for now.

Highlights from the BoJ statement included:

• Economic growth could decelerate due to global trade policy changes.
• Tariff effects may not yet be fully reflected in the data.
• Underlying CPI remains sluggish, with downside risks persisting.
• Wage growth has remained solid, slightly lifting inflation expectations.

As a result, the USD/JPY pair edged up by 0.05% to 144.96. Market participants now await a speech by BoJ Board Member Naoki Tamura later today, which could shed light on the bank’s near-term direction—especially as the Middle East truce and global trade concerns remain unresolved.

USD/JPY Key Scenarios:

• Bearish: Renewed geopolitical tensions, dovish Fed outlook, or hawkish BoJ stance could drive USD/JPY down toward 142.5
• Bullish: Hawkish Fed comments or dovish BoJ signals could lift the pair toward resistance at 148.02

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AUD/USD Forecast: CPI Print and Fed Commentary Drive Sentiment

AUD/USD remains on traders’ radars as Australia’s May inflation data is forecasted at 2.3%, slightly below April’s 2.4%. A lower-than-expected print could reinforce the Reserve Bank of Australia’s (RBA) dovish tilt, supporting multiple rate cut expectations.

Economist Shane Oliver noted:

“Australia’s labor market remains strong, but weak inflation, soft GDP, and external risks support our view of a July rate cut and possibly two more this year.”

AUD/USD Key Scenarios:

• Bearish: Soft inflation, geopolitical flare-ups, or disappointing US-China trade news could push AUD/USD below 0.6450
• Bullish: Hot CPI print or dovish Fed comments could propel the pair back toward the recent high of 0.6551

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Market Catalyst: Powell’s Testimony

Later today, all eyes turn to Federal Reserve Chair Jerome Powell’s second day of congressional testimony. Should Powell lean dovish—signaling a Q3 rate cut—USD may weaken across the board, providing a tailwind for both the Yen and Aussie Dollar.

Conversely, a hawkish tone from Powell would likely bolster the US Dollar, possibly capping gains for AUD/USD and supporting further upside for USD/JPY.

Watchlist:

• BoJ Board Member Tamura’s speech (impacting JPY)
• Australian CPI data (impacting AUD)
• Powell’s testimony (impacting USD broadly)

Stay tuned to www.dailyforex.pk for real-time updates, forecasts, and expert market insights on USD/JPY, AUD/USD, and other major forex pairs.