Japanese Yen & Aussie Dollar Forecast: Focus on Japan PPI, US CPI & Trade Talks

Summary: The Japanese Yen and Australian Dollar are at critical turning points as markets react to Japan’s PPI data and the upcoming US CPI release. While USD/JPY eyes the 145 resistance level, AUD/USD traders are closely watching US-China trade developments and RBA commentary.

USD/JPY Forecast: Eyes on Japan PPI and US CPI

USD/JPY remains in focus as inflation data from both Japan and the US shape market sentiment. Japan’s Producer Price Index (PPI) for May is expected to cool to 3.5% YoY, down from 4.0% in April. A softer reading may weaken the case for a Bank of Japan (BoJ) rate hike, potentially driving USD/JPY higher. On the other hand, a surprise increase in PPI could revive hawkish BoJ expectations, putting pressure on the pair.

US CPI to Drive Intraday Volatility

The next big event for USD/JPY is the US Consumer Price Index (CPI) report due later today. Forecasts suggest annual inflation will rise to 2.5% in May from 2.3%, with core inflation edging up to 2.9%. A hotter-than-expected CPI could push the Federal Reserve away from near-term rate cuts, boosting the US dollar and possibly sending USD/JPY above the 145 level and toward the May 29 high of 146.28.

However, if inflation disappoints, dovish expectations may drag the pair back to support near 142.50, with 142.36 as the key downside level.

USD/JPY Key Scenarios

Bullish: Weaker Japan PPI + Strong US CPI → Potential rally toward 145–146.28
Bearish: Strong Japan PPI + Soft US CPI → Decline toward 142.50–142.36

AUD/USD Outlook: Trade Talks & US CPI in the Driver’s Seat

The Australian Dollar (AUD/USD) remains sensitive to trade headlines and risk sentiment. As US-China trade talks resume, any signs of a breakthrough could support Aussie strength. China accounts for over one-third of Australia’s exports, and positive trade developments could boost AUD/USD above 0.6550, with the next target at 0.6600.

On the flip side, stalled or failed negotiations may reignite global recession fears, strengthening the US dollar and pushing AUD/USD below 0.6500, possibly toward 0.6450, aligned with the 50-day and 200-day EMAs.

RBA Signals Mixed, Watching Inflation

At a recent press conference, RBA Governor Michele Bullock emphasized that escalating trade tensions could hurt Australia’s economy. The RBA remains cautious, with rate adjustments dependent on global conditions.

AUD/USD Key Scenarios

Bullish: US-China progress + Hawkish RBA tone → Upside toward 0.6550–0.6600
Bearish: Trade tensions + Dovish RBA → Pullback to 0.6450–0.6500