Japanese Yen and Australian Dollar Outlook: Inflation and China’s Industrial Data Drive Market Moves

The Japanese Yen (JPY) and Australian Dollar (AUD) are set for volatile sessions as traders await key economic indicators from Japan, China, and the United States. Inflation trends in Tokyo and China’s industrial profits are expected to influence BoJ and RBA policy expectations, while US inflation data could shift USD-related forex pairs.

🇯🇵 Japanese Yen Outlook: Tokyo CPI and Retail Sales Under the Spotlight

The Tokyo Core CPI for June is forecast to slow to 1.9% YoY, down from 2.1% in May, potentially weakening BoJ rate hike bets. A softer print could apply downside pressure on USD/JPY, as expectations for tighter monetary policy diminish. However, an upside surprise in inflation may revive speculation of a rate hike in Q3, boosting the yen.

Retail sales data will also be closely watched. Forecasts suggest a 2.7% YoY increase, compared to 3.3% in April. Any sign of softening consumer demand may reinforce the BoJ’s cautious stance, especially after the central bank’s June meeting revealed inflation risks were tilted to the downside.

BoJ Policy Insight:
“If inflation and economic activity evolve as expected, the BoJ will consider further rate hikes,” said the central bank in its latest policy summary.

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💹 USD/JPY Technical Outlook: Watching Inflation and Fed Commentary

The Core PCE Price Index — the Fed’s preferred inflation gauge — is forecast to rise to 2.6% YoY in May. A hotter-than-expected print may push USD/JPY toward the recent high of 148.03, reinforcing the Fed’s cautious tone. Conversely, softer inflation could boost Fed rate cut expectations, potentially driving USD/JPY lower toward 142.50 support.

Key USD/JPY Scenarios:

• 🔻 Bearish: Hotter Japan CPI, weaker US inflation, rising Middle East tensions – target 142.50
• 🔺 Bullish: Softer Japan CPI, sticky US inflation – target 148.03

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🇦🇺 AUD/USD Forecast: China’s Industrial Profits to Guide Aussie Strength

The Australian Dollar is closely tied to Chinese economic performance. Industrial profits in China are expected to rise 1.5% YTD in May, up from 1.4% in April. A stronger print may signal improving demand and support AUD/USD, especially as China accounts for over 30% of Australia’s exports.

RBA Governor Michele Bullock recently emphasized that China’s economic trajectory remains a key factor in shaping Australian monetary policy. Any improvement in Chinese data may reduce dovish pressure on the RBA and support the AUD.

Governor Bullock stated:
“A worsening US-China trade war could weigh heavily on Australia’s economy, potentially forcing rate adjustments.”

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📊 AUD/USD Key Technical Levels and Scenarios

• Support: $0.6500 (psychological level), $0.6450 (channel support), 50-day EMA at $0.6438
• Resistance: $0.6552 (7-month high), $0.6570 (ascending channel upper boundary)

Scenarios to Watch:

• 🔺 Bullish: China data beats expectations, risk sentiment improves – target $0.6563 and $0.66
• 🔻 Bearish: Weak China data, trade tensions resurface – drop toward $0.65 or lower

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📌 Conclusion: JPY and AUD Traders Await Crucial Data Triggers

With the market on edge over inflation, trade, and geopolitical developments, both JPY and AUD face key directional catalysts. Watch for updates on Tokyo inflation, China’s industrial sector, and the US PCE report. These releases will influence interest rate differentials and shape short-term price action across USD/JPY and AUD/USD.

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