Japanese Yen and Aussie Dollar Forecast: Volatility Ahead of Inflation and Fed Minutes

Bank of Japan Conference in Focus

The second day of a two-day Bank of Japan annual conference on Wednesday, May 28, will spotlight Japan’s economy, inflation, and monetary policy. These are key themes influencing USD/JPY trends.

On May 27, BoJ Governor Kazuo Ueda kept the door open to rate hikes if underlying inflation sustainably hits the 2% target and economic growth aligns with forecasts. The USD/JPY pair dropped to a May 27 session low of 142.108 before rebounding to close at 144.321.

Further updates from the BoJ conference will drive sentiment toward the BoJ’s policy stance and affect demand for the Japanese Yen. Support for a Q3 2025 rate hike could send USD/JPY toward the Tuesday low of 142.108. However, calls to delay policy moves to assess tariff impacts may weaken the Yen and lift the pair toward 145.

April’s core CPI (Ex-food and energy) rose 3% year-on-year, up from 2.9% in March, above the BoJ’s 2% target. However, the economy contracted 0.2% in Q1, tempering near-term rate hike expectations.

A Reuters poll (May 7–13) showed:

• 67% of economists (39 of 58) anticipate no policy change in Q3, up from 36% in April.
• 52% forecast a 25-basis-point rate hike in 2025.

While BoJ signals remain pivotal, trade developments are equally influential. Rising trade tensions could fuel safe-haven demand for the Yen, pressuring USD/JPY. Conversely, easing tensions may drive the pair higher.

USD/JPY Daily Outlook: Fed Signals in Focus

Later in the session, Fed chatter and the FOMC Meeting Minutes will impact US dollar demand and USD/JPY trends. Calls to cut rates in Q3 2025 to bolster the US economy could pressure the greenback, sending USD/JPY toward Tuesday’s 142.108 low. On the other hand, hawkish rhetoric, signaling a potential delay to rate cuts, may push the pair toward the May 20 high of 145.507.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Escalating trade tensions, hawkish BoJ signals, or dovish Fed comments could drag USD/JPY below 142.108 toward 140.
• Bullish USD/JPY Scenario: Easing trade risks, a dovish BoJ, or hawkish Fed signals may lift the pair toward 145.507.

See today’s full USD/JPY forecast with chart setups and trade ideas.

AUD/USD in Focus: Inflation and the RBA Outlook

On May 27, Aussie inflation data will put AUD/USD in the spotlight as markets assess the chances of further RBA rate cuts. Economists expect the Aussie Monthly CPI Indicator to soften to 2.3% in April, down from 2.4% in March.

A lower print, nearing the RBA’s lower band of its 2-3% target range, could fuel speculation about multiple RBA rate cuts. A more dovish RBA stance would impact Aussie dollar demand, pressuring AUD/USD. Conversely, a surprise rise in inflation could reduce the odds of multiple RBA rate cuts, sending the pair higher.

Shane Oliver, Head of Investment Strategy and Chief Economist at AMP, remarked on last week’s RBA press conference and policy outlook, stating:

“RBA monetary policy is “somewhat less restrictive” but the cash rate is still above the avg of the RBAs estimates of neutral (~ 2.8% in this chart). With trimmed mean infl expected to be around target & policy still tight further cuts are likely. We expect the next cut in Aug.”

AUD/USD: Key Scenarios to Watch

• Bearish Aussie dollar Scenario: Weaker-than-expected Aussie inflation or dovish RBA signals may send AUD/USD below the 200-day Exponential Moving Average (EMA) toward $0.64.
• Bullish Aussie dollar Scenario: Hotter inflation or hawkish RBA chatter could send the pair toward the May 26 high of $0.65370.

Click here for a more comprehensive analysis of AUD/USD trends and trade data insights.

Aussie Dollar Daily Outlook: The Fed Effect

Later today, Fed updates will impact US-Aussie interest rate differentials and AUD/USD. Hawkish FOMC Meeting Minutes and Fed commentary may widen the US-Aussie interest rate differential in favor of the US dollar. A wider differential could drag AUD/USD toward the 200-day EMA. A drop below the 200-day EMA would expose the 50-day EMA and $0.63623 support level.

On the other hand, dovish signals could raise bets on a Q3 Fed rate cut, narrowing the rate differential and driving AUD/USD toward $0.65370

Trade developments also remain a key driver. On May 23, AUD/USD soared from $0.64069 to $0.65370 following Trump’s EU tariff threats. However, his flip-flop on EU tariffs left the pair below $0.64500 on May 27.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ policy outlook, Japan economic data, and trade negotiations.
• USD/JPY and AUD/USD: Fed commentary, FOMC Minutes, and trade sentiment.
• AUD/USD: Aussie inflation, RBA positioning, and China’s policy direction.

For more in-depth analysis, review today’s USD/JPY and AUD/USD trading setups in our latest reports.