USD/JPY has recovered all of last week's losses and sits back near its highest levels since 1986, with the Japanese yen still short of bullish drivers. The pair is trading around the 162.00 handle as attention turns to the upcoming US CPI report.
USD/JPY has clawed back every bit of last week's decline, returning near its highest levels since 1986 as the yen keeps lacking bullish drivers. The pair is now trading again around the 162.00 handle.
Dovish repricing caps the dollar
The US dollar came under some pressure late last week after the US NFP report. The data wasn't bad, but it was enough to trigger a slightly dovish repricing in interest rate expectations: the chances for a July hike now stand at just 25%, while the probability of a September move dropped to 57%.
Given the Fed's focus on inflation, the US CPI print will likely matter more. Until then, the dollar might stay rangebound. This week offers little else, and the FOMC meeting minutes due tomorrow are the only meaningful catalyst, watched for any further signal on the next policy move after limited forward guidance from Fed Chair Warsh.
Stealth intervention keeps the yen guessing
On the yen side, a sharp appreciation last Thursday looked like stealth intervention. The move was most likely just speculators unwinding positions for fear of an actual intervention, after Japanese officials said they will stop signalling intervention risks in advance and start targeting speculators with stealth interventions instead.
The yen then erased all of those gains, leaving the pair back near 162.00. In the short term, the threat of stealth intervention might keep the yen supported, but the main trend remains skewed to the upside amid slow BoJ tightening and muted inflation developments.
What comes next
On the daily chart, USDJPY bounced from the 160.50 support zone and recovered most of last week's losses. Momentum accelerated once the price broke above the resistance around 161.50, a level that should now act as support. Focus has shifted to the US CPI report, which could lift the dollar if the data surprises to the upside or pressure it further if it disappoints.
Source: investingLive
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