Yen and Aussie Dollar Outlook: Key Data Risks and Fed Policy Signals Drive Market Moves

Japanese Yen Outlook: Capital Spending and PMI in Focus

The Japanese Yen (JPY) steadied on Monday after Japan’s capital spending rose 7.6% YoY in Q2, up from 6.4% previously, reflecting stronger business investment. This trend supports expectations of job growth and wage-driven inflation, which could pressure the Bank of Japan (BoJ) to consider further policy tightening.

The USD/JPY pair edged lower from 147.04 to 146.95 following the release. Later today, finalized manufacturing PMI data will be critical. Preliminary figures had shown a modest rebound to 49.9 in August from 48.9 in July, but weakening overseas demand continues to weigh on sentiment.

If external demand continues to soften, BoJ rate hike bets may ease, limiting Yen strength. Conversely, stronger data could reinforce speculation of a hawkish BoJ move later this year, potentially driving USD/JPY closer to the 145.00 support level.

USD/JPY Scenarios to Watch:

📉 Bearish: Stronger Japanese data + dovish Fed → USD/JPY could slide toward 145.00.
📈 Bullish: Softer Japanese data + hawkish Fed → USD/JPY could rebound toward 150.00.

US Federal Reserve: Policy Clues in Focus

Investors also await comments from FOMC members later in the day, following the US Personal Income and Outlays report. If Fed speakers hint at delaying rate cuts, USD/JPY could test the 200-day EMA. However, dovish signals tied to labor market concerns might push the pair below the 50-day EMA, exposing 146.00 as the next key level.

Australian Dollar Outlook: China PMI as the Decisive Factor

The AUD/USD pair trades near 0.65, with traders eyeing the China Manufacturing PMI as the next catalyst. The index is expected to hold at 49.5 for August.

A stronger PMI could lift demand for Australian exports, supporting a hawkish RBA stance and pushing AUD/USD toward 0.6550 and possibly 0.66.
A weaker PMI would add to global demand concerns, fueling RBA rate cut expectations for November and dragging AUD/USD toward the 50-day EMA or even 0.6450.

RBA Governor Michele Bullock has emphasized that trade terms with China remain vital for Australia’s outlook. Markets currently price in a November rate cut, but stronger Chinese data could delay easing and provide short-term support for the Aussie.

AUD/USD Scenarios to Watch:

📉 Bearish: Weak China PMI + dovish RBA → AUD/USD toward 0.6450.
📈 Bullish: Strong China PMI + cautious RBA → AUD/USD above 0.6550, eyeing 0.66.

Bottom Line

Both the Yen and the Aussie Dollar face critical risk events this week. For USD/JPY, Japanese PMI data and Fed commentary could decide whether the pair breaks below 146 or rebounds toward 150. For AUD/USD, China’s PMI release will likely dictate whether the Aussie extends gains or slips back into its range.

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Yasher Rizwan