Japanese Yen and Aussie Dollar Forecasts: Israel-Iran Conflict and China Data in Focus

Peace Deal Buzz Sways USD/JPY as Traders Weigh BoJ and Fed Signals

Speculation about a potential Israel-Iran peace deal impacted safe-haven flows and USD/JPY trends early in the session on Monday, June 16. It was a particularly news-heavy June 15, culminating in reports of Iran calling on Middle Eastern states to mediate with the US to end the Israeli strikes and resume nuclear negotiations with Washington.

According to sources speaking with the Jerusalem Post:

“Iran has reached out to Oman and QATAR, requesting that they mediate with Washington in an effort to halt the ongoing Israeli strikes and restart nuclear talks. At the same time, Saudi Arabia is also working behind the scenes to promote a ceasefire framework aimed at resuming talks, the source added.”

A de-escalation in the Israel-Iran conflict could dampen Japanese Yen demand. USD/JPY climbed to a high of 144.37 in early trading on June 16. Progress toward a ceasefire agreement could further reduce Yen demand. However, traders should brace for a sharp shift if talks collapse.

Middle East Conflict Muddies BoJ Policy Outlook

Developments in the Middle East come at a crucial time for the USD/JPY pair as the BoJ kicks off its June monetary policy meeting. Economists expect the BoJ to keep interest rates at 0.5% on June 17, exposing USD/JPY to the Bank’s policy outlook. A de-escalation in the Middle East would likely redirect focus to trade developments and Japan’s inflation and economic outlook.

Recent economic indicators, including household spending and trade data, supported a less hawkish BoJ rate path. However, a hawkish rate hold on June 17 may trigger a Yen rally, dragging USD/JPY lower. On the other hand, concerns about tariffs, trade terms, and the economy may drive the pair higher.

USD/JPY Daily Outlook: US Manufacturing in Focus

Later in the session, the US manufacturing sector will face scrutiny. Economists forecast the NY Empire State Manufacturing Index to rise from -9.2 in May to -6.7 in June.

A higher reading could ease US recession fears, bolstering US dollar appetite and pushing USD/JPY toward 145. A breakout above 145 could open the door to retesting the 50-day EMA. However, a softer print may fuel speculation about a US recession, supporting a more dovish Fed policy stance. Rising bets on a 2025 Fed rate cut may drag USD/JPY toward the June 13 low of 142.788, bringing 140 into sight.

Beyond the data, trade developments and Israel-Iran-related news will continue influencing USD/JPY trends.

USD/JPY: Key Scenarios to Watch

• Bearish USD/JPY Scenario: Escalation in the Israel-Iran conflict, hawkish BoJ signals, or weaker US data could drag USD/JPY toward 140.
• Bullish USD/JPY Scenario: Easing geopolitical risks, dovish BoJ rhetoric, or stronger US data may send the pair above 145.

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

AUD/USD in Focus: Geopolitics to Influence Aussie Dollar Demand

Economic data from China and updates from the Middle East will influence AUD/USD trends on June 16. Progress toward an Israel-Iran ceasefire could boost Aussie dollar demand, sending AUD/USD toward $0.65, while an escalation may pull the pair toward $0.64.

While updates from the Middle East will be crucial, economic data from China will also influence Aussie dollar appetite. Retail sales, industrial production, fixed asset investment, and unemployment data will offer insights into China’s economy midway through the second quarter.

Better-than-expected data could ease fears of US tariffs impacting China’s economy. Given that China accounts for one-third of Aussie exports, an improving economic backdrop may boost the demand for Aussie goods. Improving Australia-China trade terms would bolster the Australian economy, supporting a less dovish RBA stance. However, weaker-than-expected readings may signal a waning demand environment, supporting a more dovish RBA stance.

In May, RBA Governor Michele Bullock warned of the potential impact of a US-China trade war on the Aussie economy and RBA policy, 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.”

AUD/USD: Key Scenarios to Watch

• Bearish AUD/USD Scenario: Rising geopolitical tensions, weak Chinese data, or dovish RBA signals may send AUD/USD toward $0.64.
• Bullish AUD/USD Scenario: Easing Middle East tensions, positive Chinese data, or hawkish RBA cues could send AUD/USD toward $0.65.

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

Aussie Dollar Daily Outlook: US Manufacturing Sector Data and Near-Term Action

Later today, the NY Empire State Manufacturing Index will influence AUD/USD trends via US-Aussie interest rate differentials.

Improving manufacturing sector activity may support a less dovish Fed stance, widening rate differentials. A wider rate differential, favoring the US dollar, may drag AUD/USD below the 200-day and 50-day EMAs, exposing the $0.64 level. Conversely, a lower print could narrow the rate differential, sending AUD/USD toward $0.65.

Key Market Drivers to Watch Today:

• USD/JPY: BoJ policy signals.
• USD/JPY and AUD/USD: NY Empire State Manufacturing Index, trade developments, and Israel-Iran-related news.
• AUD/USD: Chinese economic data, RBA policy signals, and Beijing’s stimulus chatter.

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