Key Highlights:
- Weak Japanese PMI data hints at slowing growth, reducing the likelihood of near-term BoJ tightening.
- AUD/USD under pressure as soft GDP figures could fuel RBA rate cut expectations.
- U.S. ISM Services PMI and ADP employment data likely to shape Fed rate cut bets and impact USD/JPY and AUD/USD trends.
USD/JPY Forecast: All Eyes on Japan PMI and U.S. Economic Data
Japan’s Services PMI Tests BoJ Policy Outlook
On June 4, attention turns to Japan’s services sector, a major contributor to its GDP. The Jibun Bank Services PMI slipped from 52.4 in April to 50.8 in May. A further dip below the 50 mark would raise concerns of an economic slowdown, potentially delaying the Bank of Japan’s (BoJ) anticipated rate hikes and weakening the Japanese Yen.
In contrast, a surprise improvement in PMI could revive expectations of a Q3 2025 BoJ policy shift, potentially strengthening the Yen.
Earlier data showed Japan’s composite PMI fell into contraction at 49.8 in May. A Reuters survey from mid-May revealed:
- 67% of economists now expect BoJ to hold rates through Q3 2024.
- 52% forecast a 25-basis-point rate hike in 2025.
Meanwhile, trade headlines remain influential—intensifying tensions could lift demand for the safe-haven Yen, while easing friction may boost USD/JPY.
USD/JPY Near-Term Outlook: U.S. Data in Focus
Later in the day, the U.S. ISM Services PMI and ADP Employment figures are key to shaping USD demand. ADP is expected to show a rise to 115k in May (up from 62k), while the ISM PMI is forecast to climb from 51.6 to 52.
Stronger data may delay Fed rate cuts and push USD/JPY toward resistance near 145 and the 50-day EMA. Conversely, softer results could revive dovish expectations and drive the pair down to the 140.309 support level.
Scenarios for USD/JPY:
- Bearish: Weak U.S. data, rising trade risks, or hawkish BoJ signals could push USD/JPY toward 140.309.
- Bullish: Strong U.S. data, dovish BoJ tones, or easing trade tensions may lift the pair to 145.507.
AUD/USD Outlook: GDP Data Set to Drive RBA Policy Expectations
Australia’s Q1 GDP in Spotlight
Australia’s GDP report for Q1 2025—due June 4—is expected to show 0.4% QoQ growth, down from 0.6% in Q4. A weaker print may boost expectations of more RBA rate cuts and push AUD/USD below the $0.64 threshold.
If GDP surprises to the upside, it could dampen dovish expectations and help AUD/USD recover toward the $0.65 level, especially near the May 26 high of $0.6537.
RBA Governor Michele Bullock recently flagged household spending and the labor market as major domestic risks. AMP’s Shane Oliver noted the RBA’s cautious stance:
“A 0.25% cut was chosen to remain measured and flexible in light of inflation and employment goals, with a potential follow-up cut likely in August.”
Scenarios for AUD/USD:
- Bearish: Weak GDP and dovish RBA comments could drive the pair below the 200-day EMA and down to $0.6362.
- Bullish: Strong GDP or hawkish RBA signals may support a move toward $0.6537.
Broader Market Watch
Impact from U.S. Labor and Services Data
U.S. labor market strength and service sector momentum could widen the yield gap between U.S. and Australian assets, favoring the U.S. dollar and weighing on AUD/USD. Conversely, weaker U.S. data may support Aussie gains.
Today’s Key Drivers:
- USD/JPY: Japan Services PMI, BoJ signals, and trade talks.
- AUD/USD: Aussie GDP release, RBA outlook, and U.S. economic indicators.
- Both pairs: U.S. Fed commentary, ISM Services PMI, ADP Employment data, and global trade developments.
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