Yen Rally Accelerates on Strong Japan Data, AUD/JPY and NZD/JPY Break Down for Different Reasons

The Japanese Yen's rally accelerated following stronger-than-expected economic data, creating significant downside pressure across major currency crosses including AUD/JPY and NZD/JPY. Japan's revised second-quarter GDP grew by 1.4% annualized, while nominal cash earnings jumped 4.7% year-over-year in July—the fastest pace since 1997. This strong data has led markets to price in a 98% probability of a Bank of Japan interest rate hike to 1.25% at its upcoming September meeting, with further tightening expected. In contrast, the Australian Dollar faces mounting headwinds as domestic economic indicators show signs of strain. Australian NAB Business Conditions fell to -1 in August, marking negative territory for the first time in six years, while consumer sentiment dropped 5.2%. Consequently, AUD/JPY has declined sharply from 114.95 and is testing key structural support at 109.25, with a break opening downside toward 103.90. NZD/JPY has similarly broken support at 91.02, targeting 89.44, as policy divergence tilts heavily in favor of the Yen.