USD JPY rebound is back in focus after last week’s sharp drop, as traders watch US CPI and developments tied to the Middle East.
The dollar fell broadly late last week. The move started after the FOMC rate decision, as the extra dissent from Fed’s Kashkari did not land as a major hawkish surprise. Then, on Thursday, heavy dollar-selling followed intervention by Japan and South Korea.
Losses deepened on Friday after reports said the US Treasury joined the intervention. The source said it was the first joint operation since 2011. Moreover, Japan’s Ministry of Finance and US Treasury Secretary Bessent said they would not hesitate to carry out more joint interventions.
USD JPY Rebound After Sharp Drop
USD/JPY is now trading around April-May levels. As a result, the source said the chance of another intervention soon is low. That could leave the pair trading more on fundamentals again.
The source said those fundamentals have not changed much. Therefore, attention has shifted to US CPI and further US-Iran developments. A de-escalation would keep pressure on the dollar, according to the source, while an escalation would support it on Fed tightening risks. In addition, a hot CPI reading would probably seal a rate hike at the September meeting.
On the yen side, the currency surged late last week after the joint move by Japan’s Ministry of Finance and the US Treasury. The source also said a rare South Korea intervention likely added to the move. Month-end flows and stretched positioning also fed the volatility.
Key Levels Shape USD JPY Rebound View
The pair fell again on Monday, but BoJ data suggested there was no intervention behind that move. Instead, the source said thin liquidity likely drove the price action. Notably, that drop has already been fully erased as speculators piled back in after the intervention created better entry levels.
The source said interventions may remain clearing events unless fundamentals change. It added that the trend is unlikely to shift without a dovish repricing in Fed rate expectations or a faster BoJ tightening pace.
On the daily chart, the pair dropped to the key 155.00 level after breaking below a major trendline. Buyers stepped in near 155.00, according to the source, while a break below that level could open the way to 152.00. On the 4-hour chart, the broken trendline now acts as resistance. On the 1-hour chart, a minor upward trendline marks the current pullback.
Later today, traders will watch US Job Openings data, followed by ADP and ISM Services PMI on Wednesday, jobless claims on Thursday, and US NFP on Friday.
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Source: InvestingLive
