USD/JPY is clawing back most of last week's intervention-driven losses as buyers defend the 155.00 handle. With another currency intervention now seen as unlikely at current levels, traders are turning to this week's US inflation data and US-Iran developments for the pair's next move.
Fed decision and joint intervention sent the dollar lower
The dollar sold off across the board in the final part of last week. The initial weakness came from the Fed's rate decision, after Fed member Kashkari's extra dissent wasn't taken as a major hawkish surprise.
Losses then deepened on Thursday, when heavy dollar-selling flows stemmed from interventions by Japan and South Korea. They extended further on Friday after reports confirmed the US Treasury had joined the intervention, the first joint operation since 2011. Japan's Ministry of Finance and US Treasury Secretary Bessent have said they will not hesitate to conduct more joint interventions in the future.
Intervention risk fades, CPI and Iran take over
USD/JPY is now trading around its April-May levels, so the pair carries a low probability of another intervention in the near term. As a result, the greenback should go back to trading on fundamentals, with the US CPI print and further US-Iran developments as the next catalysts. A de-escalation would likely keep the dollar under pressure on easing inflation worries and lower rate hike probabilities, while an escalation should support it on Fed tightening risk. A hot CPI reading would probably seal a rate hike at the September meeting.
The yen appreciated sharply late last week following the joint intervention, a move likely worsened by a rare South Korea intervention alongside month-end flows and overstretched positioning. Yesterday's push lower in USD/JPY was not accompanied by fresh Bank of Japan intervention, according to BoJ data, and appears driven instead by low liquidity conditions; Monday's drop has already been fully erased as speculators rebuild positions at the better levels the intervention offered.
Buyers defend the 155.00 handle
On the daily chart, USD/JPY dropped back to the 155.00 handle after breaking below its major trendline. Buyers stepped in around that level, with a defined risk below it, positioning for a rally back into new cycle highs. Sellers need a break below 155.00 to open the door to a drop toward 152.00.
This week's calendar includes US Job Openings data today, ADP and ISM Services PMI tomorrow, and Jobless Claims Thursday, ahead of Friday's NFP report. US-Iran developments remain in focus alongside the data.
Source: Investinglive
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