Yen Strengthens on BoJ Hawkish Signals While Aussie Awaits RBA Rate Decision

BoJ Outlook Lifts Yen Prospects Ahead of Key Data

The Japanese Yen enters a critical trading week as the Bank of Japan (BoJ) signals a possible interest rate hike in the final quarter of the year. In its latest Summary of Opinions, the central bank noted a higher likelihood of achieving its 2% price stability target in the near term, supported by wage growth, rising prices, and steady economic conditions.

However, policymakers also highlighted uncertainty surrounding US tariff policies, noting that two to three more months of assessment may be needed before a decisive move. If US tariffs have minimal impact on Japan’s economy, the BoJ could exit its cautious stance sooner than expected.

This week’s Japanese producer price index (PPI) and Q2 GDP figures will be crucial in shaping market expectations. Stronger producer prices, rising external demand, and improved consumption could bolster rate hike bets, while weaker numbers might push the BoJ toward a wait-and-see approach.

USD/JPY Technical View

The USD/JPY pair remains sensitive to central bank signals.

Bearish case: Hawkish BoJ remarks or dovish US Fed comments could push the pair toward the 50-day EMA, with 145.00 as the next support.
Bullish case: A dovish BoJ stance or hawkish Fed guidance could lift the pair toward the 200-day EMA and potentially retest the 149.35 resistance zone.

RBA Poised for 25bps ‘Hawkish Cut’ — AUD/USD in Focus

The Australian Dollar’s spotlight shifts to Tuesday’s Reserve Bank of Australia (RBA) meeting, where a 25-basis-point cut to 3.60% is widely anticipated. Economists describe this as a “hawkish cut,” meaning that while rates may drop, policy guidance is likely to remain cautious and data-dependent.

Inflation has eased from 2.9% in Q1 to 2.7% in Q2, yet labor market tightness and firm consumer inflation expectations suggest the RBA could signal a measured approach to further easing. Governor Michele Bullock’s press conference will be closely watched for any hints on future policy direction.

Later in the week, Australian labor market data could play a pivotal role in shaping the AUD’s path. Strong numbers may revive bullish momentum, while soft data could weigh heavily on the currency.

AUD/USD Technical View

Bearish case: A dovish RBA cut or weak data could drive AUD/USD toward the 50-day EMA, with the 200-day EMA as a deeper downside target.
Bullish case: Hawkish guidance or upbeat Australian data could see the pair challenge the $0.6600 resistance, with potential to retest July’s high at $0.6625.

Key Market Drivers This Week

USD/JPY: Japanese PPI, Q2 GDP, and BoJ policy remarks.
AUD/USD & USD/JPY: US CPI report and speeches from Federal Reserve officials.
AUD/USD: RBA rate decision, Governor Bullock’s press conference, and Australian jobs data.

Stay Updated with Daily Forex Pakistan.

Yasher Rizwan