USD/JPY: Key Scenarios to Watch
- Bearish USD/JPY Scenario: Rising Middle East tensions, hotter Japan inflation, or cooling US inflation could push USD/JPY toward 142.5.
- Bullish USD/JPY Scenario: Easing Iran-Israel friction, softer Japan inflation, or hotter US inflation may send the pair toward 148.026.
See today’s full USD/JPY forecast with chart setups and trade ideas.
AUD/USD in Focus: China Economy to Fuel Aussie Dollar Demand
Meanwhile, economic data from China will be a key focus for the AUD/USD pair. Economists expect Chinese industrial profits to rise 1.5% year-to-date in May compared to the first five months of 2024, up from 1.4% in April.
A pickup in industrial profits may boost investments and demand. Given China accounts for around one-third of Aussie exports and Australia has a trade-to-GDP ratio of above 50%, an improving demand environment may lift the Aussie economy. An improving economic backdrop could also support a less dovish RBA policy stance.
Conversely, a lower reading may indicate weaker Aussie trade terms and support a more dovish RBA rate path.
During the May press conference, RBA Governor Michele Bullock highlighted the influence of China’s economy, stating:
“Australia’s economy could easily be compromised if a trade war between the US and China escalates. Depending on where we end up on trade developments, there might be more interest rate adjustments. But for now, rates are in the right place.”
Governor Bullock’s comments also left the Aussie dollar exposed to US-China trade developments.
AUD/USD: Key Scenarios to Watch
- Bearish AUD/USD Scenario: Renewed Iran-Israel tensions, rising US-China trade friction, or softer China data may push AUD/USD toward the crucial $0.65 support level.
- Bullish AUD/USD Scenario: The Iran-Israel ceasefire holds, progress toward a US-China trade deal, or upbeat Chinese data could drive AUD/USD toward the June 26 high of $0.65637 and potentially the $0.66 level.
Click here for a more comprehensive analysis of AUD/USD trends and trade data insights.
Aussie Dollar Daily Outlook: US Inflation to Drive Rate Differentials
Later today, the US inflation numbers will influence US-Aussie interest rate differentials and AUD/USD trends.
Softer-than-expected inflation and personal income/spending could boost Q3 Fed rate cut bets, narrowing the rate differential. A narrower rate differential favoring the Aussie dollar could drive AUD/USD toward $0.66.
Conversely, hotter inflation and rising personal income/spending would widen the rate differential favoring the US dollar. A wider rate differential on fading Fed rate cut bets may push AUD/USD below $0.65 toward the 50-day Exponential Moving Average (EMA).