Track market-moving stories before they get noisy

The Japanese yen continued its recent retreat, reaching its lowest level since July 31 as the recent US intervention backfired. The USD/JPY pair rose to 159.43, up by 2.72% from its lowest level this month. 

The USD/JPY pair crashed hard earlier this month, reaching its lowest level since May, after the Donald Trump administration made its biggest intervention in years. It did that by converting some of its euro holdings into the Japanese yen, a move that caught European officials offguard.

The Bank of Japan (BoJ) also intervened, pumping billions of dollars to yen buying. This happened after the pair jumped to 163.96, its highest level in decades. 

The Trymp administration intervened to prevent the BoJ from intensifying its US government bond sales, which would have driven yields higher. Already, the 30-year yield has remained above 5% for months.  And this week, the US government sold ten-year bonds at the highest yield in years. 

Historically, forex market interventions tend to have a short-term impact on the currency. A good example of this is how the Japanese yen jumped on April 30th after the BoJ intervened and then resumed its downward trend.

The main issue facing the Japanese yen is that the Bank of Japan maintains low interest rates compared to the Federal Reserve. It recently hiked rates to 1%, the highest level in decades. This rate, however, is much lower than the US, which has remained between 3.50% and 3.75% this year.

The implication of this is that the USD/JPY has become a carry top carry trade pair. A carry trade is a situation where investors borrow from a low interest country and invests in a high interest rate one. In this case, they are borrowing from Japan and investing in the US.

As such, analysts believe that the Japanese yen will only have a sustained uptrend against the US when the BoJ hikes interest rates further. The BoJ has hinted that it may hike rates further this year. A Polymarket poll shows that odds of a 25 basis point hike in September have jumped to 68%.

Separately, the USD/JPY pair reacted mildly to the latest US nonfarm payrolls and consumer inflation data. The jobs report showed that the US economy lost 23k jobs in July, while the unemployment rate dropped to 4.2%. Another report released on Wednesday showed that the US inflation softened a bit in July. These numbers mean that the Fed will maintain rates unchanged this year.

USDJPY chart | Source: TradingView

The daily chart shows that the USD to JPY pair has rebounded in the past two weeks as the impact of the intervention fades. It has now jumped to 159.46, and is attempting to cross the 25-day Exponential Moving Average (EMA). 

The Average Directional Index (ADX) has continued rising and moved to 37, the highest level in months, a sign that the uptrend is continuing. Therefore, the path of the least resistance for the pair is bullish, with the next key target to watch being 160. A move above that level will point to more upside.

The only caveat to remember is that the BoJ and the US have hinted at possible interventions, meaning that these gains can easily reverse.

Key Points:EUR/USD pulled back as traders reacted to U.S. CPI report. USD/CAD failed to settle below the support level at 1.3920 - 1.3935.USD/JPY gained some ground as traders ignored the pullback in Treasury yields.

In this article:EUR/USD

-0.15%

EUR/USD ForecastGBP/USD

-0.09%

GBP/USD ForecastUSD/CAD

+0.13%

USD/CAD ForecastUSD/JPY

+0.07%

USD/JPY Forecast

U.S. Dollar Moves Higher As Inflation Rate Drops To 3.4%

DXY 120826 4h Chart U.S. Dollar Index gains some ground as traders focus on CPI report. The report indicated that Inflation Rate declined from 3.5% in June to 3.4% in July, in line with analyst estimates. Core Inflation Rate decreased from 2.6% to 2.5%. Core Inflation Rate has also met analyst expectations.

Currently, U.S. Dollar Index is trying to settle above the resistance level at 99.85 – 100.00. In case U.S. Dollar Index manages to settle above the 100.00 level, it will head towards the next resistance, which is located in the 100.50 – 100.65 range.

EUR/USD Retreats After U.S. CPI Report

EUR/USD 120826 4h Chart EUR/USD pulled back as traders focused on U.S. inflation data. Traders also monitored the dynamics of the oil markets. Oil prices were swinging between gains and losses amid geopolitical uncertainty and did not have a material impact on forex market dynamics.

The nearest support level for EUR/USD is located in the 1.1510 – 1.1525 range. in case EUR/USD declines below the 1.1510 level, it will head towards the next support at 1.1435 – 1.1450. RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

GBP/USD Pulls Back From Weekly Highs GBP/USD 120826 4h Chart GBP/USD moved away from session highs as traders reacted to U.S. CPI report. It looks that some traders hoped that U.S. inflation numbers would be lower than analyst estimates.

In case GBP/USD manages to settle below the 1.3500 level, it will head towards the support level at 1.3465 – 1.3480. A move below the 1.3465 level will push GBP/USD towards the next support, which is located in the 1.3335 – 1.3350 range.

On the upside, GBP/USD needs to settle above the resistance at 1.3550 – 1.3565 to have a chance to gain upside momentum in the near term.

USD/CAD Rebounds From Multi-Week Lows USD/CAD 120826 4h Chart USD/CAD attempts to rebound despite rising precious metals markets. Gold settled above the $4400 level, while silver made an attempt to settle above $66.00. Other commodity-related currencies were mixed in today’s trading session.

If USD/CAD settles above the 1.3950 level, it will head towards the 50 MA at 1.3995. A move above the 50 MA will push USD/CAD towards the resistance level at 1.4010 – 1.4025.

On the support side, USD/CAD needs to settle back below the 1.3920 level to gain downside momentum in the near term. In this case, USD/CAD will head towards the support at 1.3825 – 1.3840.

USD/JPY Moves Back Towards The 159.50 Level USD/JPY 120826 4h Chart USD/JPY gains some ground despite the pullback in Treasury yields. The yield of 2-year Treasuries declined below the 4.19% level, while the yield of 10-year Treasuries settled below 4.68%.

The nearest resistance level for USD/JPY is located in the 159.50 – 160.00 range. A successful test of this level will open the way to the test of the next resistance at 161.50 – 162.00. It remains to be seen whether BoJ is ready to defend the Japanese yen in case USD/JPY attempts to settle above the 162.00 level.

If you’d like to know more about how to trade forex, please visit our educational area.

Related Articles

Forex Price Action – US Dollar in Focus with CPI Being ReleasedUS 10 Year, USDJPY, Platinum, and XLE – Price Action Heading into CPIUS Dollar Price Forecast: CPI Test Looms as DXY, EUR/USD and GBP/USD Hold Key LevelsAbout the Author

Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

Latest news and analysis

Whatever the inflation figures may be, the precious metal will come out on top. Japan and the US don’t want to give the yen’s fate to speculators. The US dollar continues to recover from the blow dealt by the labour market statistics. A rally in Treasury bond yields is driving the rise in the USD index amid tensions in the Middle East and a resurgence of expectations that the Fed will tighten monetary policy in September. The probability has risen to 50% after a dip to 43% following the US jobs report. The futures market still gives a 33% chance of more than one hike in 2026.

Investors are focusing on the release of US inflation data for July. Factors pointing to a slowdown include productivity outpacing labour costs, the waning impact of tariff effects, and lower oil prices than in May, when CPI indices peaked. Those who believe consumer price inflation will resume its upward trajectory point to geopolitical factors and massive investment in AI technology.

Market sentiment is divided, and gold stands to benefit. Whatever the inflation report may be, the precious metal is capable of capitalising on it. A slowdown in CPI will weaken the US dollar and reduce Treasury yields, benefiting the metal. Conversely, an acceleration in consumer price growth against the backdrop of a clear cooling of the US labour market would point to the development of stagflation. This is traditionally seen as a tailwind for gold.

As a result, there is a sense that the precious metal has overtaken the US dollar as the primary safe haven. It is strengthening in response to news of the escalating conflict in the Middle East more rapidly than the US currency is.

Gold also has support from investors’ flight to safety amid government intervention in the forex market. According to Eurizon Capital, coordinated currency intervention by the US and Japan suggests that USDJPY will not return to its 40-year highs in the coming years. Governments will not give in to speculators. The latter’s resistance is futile.

In fact, the wide interest-rate differential between the Fed and the Bank of Japan, coupled with Tokyo’s dependence on energy imports, is pushing USDJPY higher. As the pair approaches 160, the risks of further intervention increase.

The FxPro Analyst Team

FxProhttp://www.fxpro.co.uk/?ib=606792

FxPro is an award-winning online broker offering Contracts for Difference (CFDs) on forex, futures, spot indices, shares, spot metals and spot energies. FxPro serves clients in over 150 countries worldwide and offers multilingual customer support 24/5. Trading CFDs involves significant risk of loss.

USD, USD/JPY Talking Points: The long-term USD/JPY carry trade is still swinging USD trends across the FX market. At root of the USD/JPY trade are rate expectations and as high US CPI forced expectations higher over the past two months, USD/JPY bulls drove a rally that eventually brought out coordinated intervention. Over the past four years some of the largest moves in USD/JPY have been sparked by US CPI rather than interventions and that puts even more interest behind tomorrow’s release.

The Bank of Japan and the US Treasury Department took their swing at USD/JPY two weeks ago, but since then, bulls have been clawing back. This puts perhaps even more importance on tomorrow’s US CPI report as rates markets still widely-expect the US to lift rates later this year, with an approximate 80% probability priced-in for at least one 25 bp hike.

Even September is looking like a coin flip, and that’s largely owed to the spike in CPI seen earlier this summer on the back of the war in Iran. As oil prices rallied, inflation followed, and there’s been a growing chorus of Fed-speakers that sound as though they’re warming to the idea of tightening policy, looking to avoid a repeat of the disaster in 2021 that saw the FOMC dismiss inflation as ‘transitory’ until, eventually, they had no choice but to hike aggressively in 2022.

US CPI Prints Since Jan 2021

Chart prepared by James Stanley

Rates Markets Right now rates markets are highly expecting a rate hike from the Fed later this year, which would fly in the face of President Trump’s strategy in which he wanted to install a Fed Chair that would cut rates. So far, Warsh has sounded more hawkish than dovish but as I shared after the last FOMC meeting, it seems as though he’s doing that to keep markets from just expecting that he’s going to cut rates whenever he can. If they did think that Warsh was a dove, that could give upward momentum to US Treasury Yields, such as we’ve seen, and that could complicate the picture for the US Treasury Department that has a considerable amount of debt coming due over the next four months and then more over the next year.

This is likely why he keeps saying that the market will adjust rates based on the preponderance of data rather than waiting for the Fed to do so. Nonetheless, that expectation still leans towards wide expectations for the Fed to hike, and this comes with numerous market responses such as a stronger USD, a stronger USD/JPY, etc. And if we do see those rate hike odds price out, then, reasonably, there could be a shift in price action for those markets, as well.

At this stage hike in September is a veritable coin flip.

CME Fedwatch Odds for September Chart prepared by James Stanley; data derived from CME Fedwatch US CPI is Important for USD/JPY, Which is Important for the USD and FX Market Some of the largest moves in USD/JPY over the past four years have been fueled by a US CPI release.

In October of 2022, when the Fed was hiking aggressively to tame the ‘transitory’ inflation that turned out to be not so transitory, USD/JPY was in a near-parabolic like state. To the point where Japanese officials were beginning to worry about the possibility of hyperinflation. So, they tried to step in at 145 and that largely failed, as the intervention merely prodded a pullback that USD/JPY bulls bid, eventually driving price up to 150.00.

At that point, the BoJ was forced to act, after a high of 151.95 traded. They intervened on a Friday ahead of the weekend and, again, price retreated to support before buyers piled back in.

But this time, as price re-approached that 150.00 handle that was previously defended, bulls began to back away. They still held and even bought at support, but as bounced showed up they came in with lower-highs.

What ultimately drove a reversal was the US CPI print on the morning of November 10th, 2022. That was when markets got warm to the idea that perhaps the Fed was getting a handle on inflation, and maybe they would soon be able to stop hiking and, perhaps even eventually cut rates. US CPI was 7.1% at the time and core was at 6.3% so this was still a distant prospect – but the possibility of change was enough to convince longs to bail on positions given that the theoretical cap on upside at the time, at 150.00 made chasing prices higher a less attractive setup.

That market reversed by about 2,000 pips over the course of around two months, with bulls ultimately getting back in the driver seat in January. They, again, drove right back to the same 151.95 level. And, again, it was a below-expected US CPI print in November that shook the branch of the carry trade. This time, it was a mere 23.6% retracement of that prior rally with bulls getting control in December and going right back up to the same 151.95 spot.

In April of 2024, hope was beginning to fade on rate cuts and on April 10th, the morning of a US CPI print, above expected data dashed rate cut hopes – and this time, USD/JPY broke out as the stops above 151.95 provided rocket fuel for longs, and the pair made a firm run up to the next big figure at 160.00.

The Bank of Japan, again, intervened, and that brought about a week of weakness to USD/JPY but that same 151.95 level provided a launch pad for bulls to get back in the driver seat, with price trickling back-above 160.00 shortly after.

The next intervention, in July of 2024, saw the BoJ take a different approach. This time, they waited until the morning of a US CPI print and the combination of the two forces, with inflation coming in below expectations and markets finally getting the confirmation they needed that the Fed could probably cut rates that year, sparked a dizzying reversal – and not just in USD/JPY, as the high-flying AI trade came under fire, as well.

USD/JPY Daily Chart Chart prepared by James Stanley; data derived from Tradingview Why USD/JPY is So Sensitive to US CPI The carry trade is driven by rate differentials, and those are largely driven by inflation. With central banks tasked with monitoring inflation, drops that lead to lower rate expectations or even just fewer rate hikes could be enough to compel longs to close positions, such as we saw in November of 2022 or 2023, or again in July of 2024.

And because the USD/JPY trade is still up more than 50% from early 2021 levels, then logically there’s a large built-in position on the long side of the pair, which means selling in USD/JPY can lead to USD-weakness elsewhere, such as we saw with the EUR/USD rally in Q3 of 2024, or even the bullish move in EUR/USD two weeks ago.

--- written by James Stanley, Senior Market Analyst, Global Macro

Both WTI and Brent have returned to inflated levels again as traffic in the Strait of Hormuz grinds to a halt.

There seems to be no end in sight to the war, and many economies are reporting diminishing reserves of crude.

In today’s Market Outlook, let’s take a look at Forex trading on GBPUSD, Gold, XAUUSD, Silver, XAGUSD, AUDUSD, USDCAD, USDJPY, WTI and Brent Crude Oil.

We see some technical signs on WTI with price at the upper trend line in this bearish channel and the stochastic oscillator overbought.

But this is by no means a technical trade, as only peace talks and negotiations about the passage of tankers will affect the price of crude oil.

All JPY pairs are turning bullish as the intervention by the US Treasury only seems to have had a short-term effect, as we discussed in an earlier video:

Why USDJPY Suddenly Fell | US Intervention Explained | Will the NASDAQ Catch Up? #marketoutlook.

But, as we pointed out, Scott Bessent said he might buy a few more billion dollars worth of yen, if necessary, so we may get to witness temporary JPY strength and bearish price action on pairs like USDJPY.

Check all your favourite JPY pairs as they all look roughly the same.

Last week the US saw a dreadful Non-Farm Payrolls report, meaning that the US Federal Reserve will likely not raise interest rates next month, driving USD weaker.

The Canadian figures, on the other hand, were much better than analysts’ expectations, driving CAD stronger.

These factors, with the rising price of crude, saw price action on USDCAD falling to a key level with bearish technicals.

We will now watch for a break below support and a long way to fall before the next key levels.

Be aware that tomorrow we have US CPI, which is the key measure of inflation for the Fed, so anything can happen.

Another USD pair we will be watching is AUDUSD, which has retraced from the news and has fallen to this lower trend line on the 4-hour.

The weaker USD has gold and silver climbing again, but our stochastic oscillator looks like it might turn down; keep an eye on the economic and geopolitical news.

We are seeing a descending triangle in the UK’s FTSE100 index, and price is stalled at support.

A fall in crude oil prices may also have a negative effect on the FTSE, and GBP will usually influence it.

We can see on the GBP charts that the Pound has short-term strength against all others except CAD and NZD.

That’s all for now.

CFDs and FX are leveraged products, and your capital may be at risk.

Key Points:EUR/USD settled near the 1.1550 level as traders focused on the strong rally in the oil markets. USD/CAD pulled back as precious metals markets moved higher. USD/JPY climbed towards the 159.00 level amid rising Treasury yields.

U.S. Dollar Rebounds As Oil Markets Rally

DXY 100826 4h Chart U.S. Dollar Index gains some ground as traders focus on the strong rally in the oil markets. Oil prices are up by +5% as U.S. and Iran did not reach any deal over the weekend. President Trump signaled that he would use economic pressure to force Iran back to negotiations.

High oil prices may push inflation towards higher levels and force the Fed to raise rates at the next meeting in September, which will be bullish for the American currency.

The nearest resistance level for U.S. Dollar Index is located in the 99.85 – 100.00 range. In case U.S. Dollar Index manages to settle above the 100.00 level, it will head towards the next resistance, which is located in the 100.50 – 100.65 range.

EUR/USD Moves Away From Multi-Week Highs EUR/USD 100826 4h Chart EUR/USD moved lower as traders took some profits off the table near multi-week highs. There are no important economic reports scheduled to be released in the EU today, so traders will stay focused on general market sentiment.

The nearest support level for EUR/USD is located in the 1.1510 – 1.1525 range. If EUR/USD declines below the 1.1510 level, it will head towards the next support at 1.1435 – 1.1450. RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

GBP/USD Tests New Highs GBP/USD 100826 4h Chart GBP/USD climbed above the 1.3500 level as traders ignored rising oil prices and bet on dovish Fed.

In case GBP/USD stays above 1.3500, it will head towards the nearest resistance level at 1.3550 – 1.3565. A move above the 1.3565 level will push GBP/USD towards the 1.3650 level.

On the support side, a move below the support at 1.3465 – 1.3480 will open the way to the test of the 50 MA at 1.3444. If GBP/USD manages to settle below the 50 MA, it will head towards the next support level at 1.3335 – 1.3350.

USD/CAD Attempts To Settle Below The Support At 1.3920 – 1.3935

USD/CAD 100826 4h Chart USD/CAD pulls back as traders focus on rising precious metals markets. Gold climbed above the $4350 level, while silver settled above $65.00. Other commodity-related currencies are mostly flat in today’s trading session.

Currently, USD/CAD is trying to settle below the support at 1.3920 – 1.3935. If USD/CAD manages to settle below the 1.3920 level, it will head towards the next support level, which is located in the 1.3825 – 1.3840 range.

USD/JPY Moves Higher As Treasury Yields Rise USD/JPY 100826 4h Chart USD/JPY gains ground as the yen continues to lose ground after interventions. Rising Treasury yields provide additional support to USD/JPY. The yield of 2-year Treasuries climbed above the 4.23% level, while the yield of 10-year Treasuries settled near 4.70%.

At this point, forex traders are not worried that BoJ would intervene again to support the yen. Fundamentally, the yen remains weak due to the difference in interest rates in U.S. and Japan.

If USD/JPY settles above the 50 MA at 158.84, it will head towards the resistance level at 159.50 – 160.00. A move above the 160.00 level will push USD/JPY towards the 162.00 level.

If you’d like to know more about how to trade forex, please visit our educational area.

Related Articles

EUR/USD, GBP/USD, and USD/CAD – Short-Term Forecast for 10/8/2026Markets Continue to Watch the Middle East and MoreUS Dollar Price Forecast: Jobs Data Weaken DXY – Will CPI Lift EUR/USD and GBP/USD?About the Author

Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

Friday’s US employment report was the first of four major pieces of economic data due before the Federal Reserve’s September meeting. The figures delivered a significant downside surprise, prompting markets to scale back expectations of a September rate hike to around 44%, from above 55% ahead of the release. Yet, the data hasn’t materially changed the USD/JPY forecast much. The pair has already recovered towards the levels seen before the payrolls release, trading close to 159.00. That leaves the pair once again within striking distance of the psychologically important 160.00 level. Unless upcoming US data deliver further negative surprises, or Japanese authorities step back into the market, USD/JPY could once again test that threshold.

The next major catalyst is US inflation, with CPI due later this week. At the same time, developments in oil markets remain important, particularly as uncertainty surrounding the Strait of Hormuz continues to complicate the inflation outlook.

Oil remains a key variable for the dollar outlook Crude oil prices continue to find support from the uncertainty surrounding shipping through the Strait of Hormuz. Although Donald Trump has indicated that Washington is “semi-negotiating” with Iran, the language suggests that economic pressure remains central to the strategy rather than an immediate move towards military escalation.

There have also been reports that Iran and Oman are edging towards an understanding over a shipping route through the Strait. However, any meaningful and sustained reopening of the waterway is likely to depend on wider progress in US-Iran negotiations.

A prolonged disruption to energy flows should keep inflationary pressures elevated. That could make it harder for the Fed to ease policy, even if we see further data weakness, potentially providing an underlying source of support for the greenback.

The Fed’s data-dependent approach puts CPI in the spotlight The latest market reaction reinforces just how important incoming economic data have become for the dollar. Rather than relying heavily on oil prices alone, markets are increasingly being forced to assess individual data release through the Fed’s evolving reaction function.

That shift follows Federal Reserve Chair Kevin Warsh’s decision to move away from providing firm forward guidance. His recent messaging has left greater room for incoming data to reshape expectations around monetary policy.

There are still several important data points to come before the September 16 FOMC meeting: another payrolls report and two further CPI releases, including this week’s figures.

Inflation is particularly important because of Warsh’s admission that the Fed has consistently gotten it wrong and is looking to address it. As a result, any surprises in CPI or other inflation data like PPI could generate much larger moves in the dollar than we have seen from Friday’s jobs report alone.

This also helps explain why the weak payrolls figures did not trigger a sustained collapse in USD/JPY. Markets still have several opportunities to reassess the Fed outlook before September.

What is expected from CPI data? US CPI is now arguably the most important event on this week’s calendar. The previous CPI report had certainly surprised to the downside. Headline inflation slowed more sharply than expected to 3.5% from 4.2%, while core CPI eased to 2.6%. This time, economists expect moderate weakness. Headline CPI is expected to rise 0.1% month-on-month, taking the annual rate to 3.4%. Core CPI is forecast to increase 0.2% on the month, leaving annual core inflation at 2.5%.

The question now is whether we will see that moderation, and if so, whether it is enough to trigger further dovish repricing in US dollar. But as mentioned, alongside data it is also the developments in oil prices which will determine whether expectations for a tighter Fed are rebuilt or continue to unwind.

Why the yen is struggling to capitalise on softer US data In theory, the yen should be among the clearest beneficiaries of weaker US economic data because USD/JPY remains highly sensitive to the interest-rate differential between the two economies.

Yet the yen continues to face selling pressure, even following intervention episodes. The USD/JPY sold of sharply in late July as both the US and Japanese authorities jointly intervened in the foreign exchange market to support the yen. Such coordinated action is unusual and suggests that the US Treasury may be taking a more active role in attempts to stabilise the currency.

However, intervention alone is unlikely to deliver a durable change in the direction of USD/JPY. Foreign exchange intervention can disrupt positioning, reduce excessive volatility and alter market psychology. What it generally cannot do is permanently overturn a powerful macroeconomic trend.

Even growing expectations of a September Bank of Japan rate increase have so far struggled to generate a sustained reversal in the pair.

This is partly because the interest-rate gap with the US remains wide enough to keep carry-trade demand for the dollar alive.

Softer US data may improve the fundamental case for a stronger yen, but positioning and yield differentials can continue to work in the opposite direction – especially if oil prices remain elevated for longer.

USD/JPY forecast: 160 remains firmly on the radar Technically and fundamentally, USD/JPY remains caught between competing forces. The pair has already recovered to above 158.50, effectively returning to the area where it traded before Friday’s payrolls shock.

That recovery suggests the market has not yet fully embraced a sustained dovish repricing of the Federal Reserve. With the USD/JPY now also back above the 200-day average, the near-term path of least resistance is no longer to the downside.

Source: TradingView.com The path ahead is therefore likely to remain volatile. A return towards 160.00 remains a realistic possibility, particularly if US inflation proves sticky or oil prices remain elevated. 160.50 is the next obvious resistance followed by 162.00.

Meanwhile, if support around 158.00 area gives way and price moves below the 200-day again, then in the case, a return to 157.00 and possibly 156.00 will become likely. For that to happen, you’d feel US CPI will have to be quite weak this week. 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

Knowing how to trade the Consumer Price Index (CPI), one of the most important measures for inflation, is an essential skill for all types of traders, no matter their level of expertise. The CPI report has the power to shape central bank monetary policies and can send ripples through international markets. This comprehensive guide offers useful tips on how to interpret the CPI data, anticipate central bank reactions and execute disciplined trades with clarity while minimizing risk.

Why CPI Matters More than any Other Inflation Release To start with, the Consumer Price Index (CPI) measures how the prices consumers pay for certain goods and services change over time. It is considered a key metric of inflation for any nation’s economy and an important indicator of economic health. However, the most closely followed CPI report in the world, is the one published by the US, currently the world’s largest economy. The Federal Reserve, seasoned traders and adept investors, take the monthly results into consideration before making their next moves.

A rising or falling CPI can directly influence interest rate expectations, which subsequently impacts the USD, Treasury yields, gold and JPY carry trades. As soon as the report goes public, asset prices start experiencing rapid swings until the markets eventually adjust to a level dictated by whether the data is higher, lower or at the exact same level as forecasts.

Understanding CPI Like a Pro When looking into the rise and fall of goods and services’ prices, two separate inflation measures come up – Headline inflation and Core inflation. These two figures differ in the products they monitor and even though they are both critical economic indicators, the Core CPI tends to carry more weight for the Fed.

Headline CPI The Headline CPI rate reflects the total inflation within an economy. This raw figure encompasses all goods and services including highly volatile items, like food and energy products, the prices of which are often susceptible to seasonal changes and can shift irrespective of economic conditions. Their inclusion means the figure is more aligned with changes in real-world costs but also more easily influenced by short-term price swings.

Core CPI Core inflation is a version of CPI that filters out the prices of food and energy – highly volatile categories that can easily be affected by non-economic factors such as the weather, geopolitical events and more. Omitting these key products leads to a clearer snapshot of underlying inflationary trends which can better guide monetary policy in achieving its primary objective – safeguarding medium-term price stability. That is why the Fed relies more on Core CPI to form its central bank policy.

How CPI Moves Markets When it comes to market reaction, the CPI forecast matters more than the actual figure. What markets respond to is the difference between the consensus forecast and the actual results. As deviation grows, the reaction becomes more intense resulting in price fluctuation, extensive stop-loss activation and the formation of a strong intraday trend. Keep in mind that the forecast is already priced in, what shifts prices is the element of surprise.

When CPI data exceeds expectations, market participants expect the Fed to raise interest rates to cool inflation down. Higher rates make yield-returning assets like government bonds more attractive to investors domestically and abroad. This scenario tends to strengthen the US dollar causing major pairs like the USDJPY to rise. At the same time, non-yielding precious metals like gold and silver can lose their appeal, which can trigger selloffs and a price dive.

If CPI results come in lower than expected, markets tend to expect a more dovish approach from the Fed.  This can send off an instant alarm signal across global markets. Lower interest rates can decrease demand for dollar-denominated securities which in return weakens the US dollar. This could intensify market risk sentiment, driving investors to safe-haven assets like the Japanese Yen (JPY) and precious metals like gold. The increased capital inflows into these two assets can cause gold to rally and the USDJPY to drop.

How CPI Interacts with Other Data Within the economy, circular patterns are predominantly present – changes in one sector can spill over to other areas. The CPI has a strong correlation with other key indicators like the PPI, the NFP, Wage Growth, and Retail Sales. They are all caught within a dynamic, interconnected feedback loop. None of them moves alone; changes in one tend to trigger changes in the others.

PPI – Producer Price Index The Producer Price Index measures the change in prices for wholesale goods, revealing changes in raw input costs. Unlike the CPI that tracks price changes paid by consumers, the PPI shows how prices change for producers. Both measures show inflation in a different but complementary way.

When producers see their input costs climb higher, they tend to increase product prices to cover the higher expenses. Thus, customers are often burdened with additional charges. In cases like these, a higher PPI can lead to a higher CPI.

Wage Growth & NFP Wage growth indicates the rate at which average salaries grow over time. On the other hand, the non-farms payroll report shows how many jobs were added or removed from the US workforce in manufacturing, construction and goods within a month. Both reports are key indicators of economic health, can affect living standards and inflation, and are taken into consideration by the FOMC when making interest rate decisions.

How are these metrics in constant interplay with inflation? A significant increase in jobs and fast wage growth can be evidence of inflationary pressures. Employers who hire more staff and pay them higher salaries need to raise product and service prices to maintain their profitability at the same levels. At the same time, the employees have more spending power which in turn increases the demand for goods and drives prices in the broader market even higher. These conditions can lead to higher CPI rates and can urge the FOMC, the US Federal Reserve policymaking body, to increase interest rates.

In contrast, a drop in jobs and slow wage growth can be a sign of economic slowdown. As salaries show no change and hiring slows down, consumers have less money to spend. This can cause demand for goods and services to decline, pushing product prices and the CPI down. In an attempt to boost the economy, the Fed could lower interest rates.

Retail Sales Retail Sales is another major economic barometer which shows the total amount of products purchased by consumers within a specific period. In the US, Retail Sales are published monthly and constitute a vital measure for the national economy in which consumer spending represents two thirds of the gross domestic product.

The monthly figure often moves alongside the CPI. High sales can point towards an expanding economy in which consumer confidence is increased and demand is strong – conditions that can lead to higher inflation and potentially tighter monetary policy. Alternatively, declining sales can indicate an economic downturn, decreased household spending and weak demand for goods and services. In this scenario, inflation usually drops, which might prompt the Fed to lower interest rates to help stimulate the economy.

The General Rule The PPI, Wage Growth, NFP and Retail Sales reports moving in the same direction can reveal a strong economic cycle. High figures provide firm evidence for economic expansion, in which the CPI is expected to rise. Low numbers give a strong signal for a declining economy and a lower CPI rate. In synchronized conditions like these, the CPI trade becomes highly probable.

How CPI Guides the Fed & why USDJPY Reacts Violently The Fed has a dual mandate: to maintain price stability with a target inflation rate of 2% and keep the labor market healthy. The U.S. economic body closely watches the CPI, the key inflation metric, to adjust its monetary policy.

A low or falling CPI can reflect slow market growth which can prompt the Fed to lower interest rates. This reduces borrowing costs, which promotes business investment, helps boost consumer spending and revitalizes financial markets. However, if CPI comes in higher than expected, it signals that the economy could be growing too fast. In response to higher inflation, the Federal Reserve could increase interest rates which makes borrowing more expensive. This means less money enters the economy, businesses development halts, consumers spend less and investing declines.

USDJPY showcases heightened sensitivity to inflation, and it is a popular currency pair with investors for this type of setup. Let’s break down the why.  To begin with, interest rate differentials between the US and Japan can considerably affect USDJPY. As we’ve seen, when the CPI rate climbs higher, the Fed raises interest rates, and Treasury yields increase. This makes the government-issued securities attractive investment options for local and international investors, strengthening the U.S. dollar and pushing the USDJPY exchange rate higher.

Now, let’s consider the opposite scenario. When CPI data comes in lower than expected, the Fed employs a looser monetary policy to boost the economy. This includes lower interest rates and in effect lower Treasury yields. The reduced return on the U.S. government debt securities makes them a less desirable investment option and causes a drop in the USD, which in turn translates into a lower USDJPY exchange rate.

How Gold (XAUUSD) Reacts to CPI Decoding the relationship between the CPI and the price of gold is crucial if you are looking to capitalize on inflation and its subsequent wave of effects on the precious metal. The first thing you need to be aware of is that gold tends to move in the same direction as CPI and has a moderately inverse correlation to U.S. Treasury yields. Let’s delve deeper into this financial interplay.

Historically, when CPI increases pushing the Fed towards lower interest rates and Treasury yields, the price of gold generally tends to climb higher. This can be attributed to gold’s status as a safe-haven asset. When inflationary pressures cause purchasing power to drop and economic growth has to be slowed down with a tighter monetary policy, investors move funds into gold to protect their capital.

In the reverse situation, when the CPI is relatively stable or declining, the price of gold tends to show more variable patterns of movement, usually leading to a substantial drop. This points to other factors interfering with gold prices, when inflationary pressures are low. The general trend is that a drop in CPI, followed by a decrease in interest rates and Treasury yields, tends to push the US dollar lower and gold higher. However, it is advisable that you consider CPI data within a broader economic framework to ensure your moves align with the overall global market conditions.

The CPI Playbook: USDJPY & Gold After you get a grasp of the significance of the CPI, the way it interacts with other key economic reports and correlates with USDJPY and gold, you can start trading any inflation-caused chain of reactions with confidence. To increase your chances of a successful outcome, a step-by-step plan of action is essential. We present you with our own expert strategy guidebook based on tested game plans applied by experienced macro traders in global markets.

USDJPY – CPI Strategy Step 1 – Pre-News Preparation:

Mark key levels – Note down the previous day’s highs and lows for the Asian and New York trading sessions Identify liquidity pools – chart areas where a large volume of pending orders could be triggered. Search for equal highs or lows pointing to consolidation zones. These points gather institutional interest and can turn into magnets for price. Reduce your position size – volatility tends to rise around the release of the CPI report Step 2 – First Reaction:

Ignore the market’s first reaction – the first spike is market noise, driven by algorithmic trading Do not trade during the first 1-2 minutes – volatility surges around this time Step 3 – Wait for Confirmation

Look for a Directional Candle within the 5-minute to 15-minute timeframe. The candle should: have a large real body and small wicks, giving a clear signal that markets moved strongly in a specific direction. close near a key high or low level. NOTE: Beware of immediate wick rejection. In this case the candle shows significant move towards a particular direction and then reverses to close near its opening price.

Wait for a Confirmation Candle – this gives the final confirmation for the trend, and it should display the below characteristics: Increased trading volume – signaling a large number of traders are active Close near the price’s peak or bottom – depending on whether it is an uptrend or downtrend Larger size – it is usually bigger than the previous candles Alignment with the trend – it should be bullish for a bullish trend, bearish for a bearish trend Step 4 – Execute Based on CPI Outcome

If the CPI rate comes in above forecasts, the USDJPY exchange rate will most likely increase.

Check that liquidity is above pre-release highs to confirm the market is bullish Place a stop loss below the Confirmation Candle low Buy USDJPY If CPI rate comes in below forecasts, the USDJPY exchange rate will most likely decline.

Check that liquidity is below pre-release lows to confirm the market is bearish Place a stop loss above the Confirmation Candle high Sell USDJPY Start Trading USDJPY

Gold (XAUUSD) – CPI Strategy Before entering this trade, please note that Gold is more volatile than USDJPY.

Step 1 – Mark the Pre-News Range

Identify the high and low levels formed 30 – 60 minutes before the release of the CPI report. Step 2 – Ignore the First Reaction

The first post-CPI spike is often a fakeout. Step 3 – Wait for Clear Acceptance

Study candles within the 5-minute or 15-minute timeframe to confirm “acceptance levels” – levels the price is trading within and that buyers and sellers don’t try to break away from If the price breaks the range and holds, there could be trend continuation – the price will most likely continue in the same direction after the first reaction. If the price rejects the breakout, a reversal could emerge – the price will most likely continue moving in the opposite direction. Look for a Directional Candle within the 5-minute to 15-minute timeframe. The candle should: have a large real body and small wicks, giving a clear signal that markets moved strongly in a specific direction. close near a key high or low level. NOTE: Beware of immediate wick rejection. In this case the candle shows significant move towards a particular direction and then reverses to close near its opening price.

Wait for a Confirmation Candle – this gives the final confirmation for the trend, and it should display the below characteristics: a. Increased trading volume – signaling a large number of traders are active

b. Close near the price’s peak or bottom – depending on whether it is an uptrend or downtrend

c. Larger size – it is usually bigger than the previous candles

d. Alignment with the trend – it should be bullish for a bullish trend, bearish for a bearish trend

Step 4 – Execute Based on CPI Results

If the CPI rate comes in above forecasts, the price of gold will most probably drop.

Check that liquidity is below pre-release lows to confirm the market is bearish Place a stop loss above the Confirmation Candle high Sell XAUUSD If the CPI rate comes in below forecasts, the price of gold will most probably rise.

Check that liquidity is above pre-release highs to confirm the market is bullish Place a stop loss below the Confirmation Candle low Buy XAUUSD Risk Management – The Most Important Part Before you enter the markets, there’s one thing you need to understand – not every trade can be a successful one. That is why an effective trading strategy incorporates more than just checking numbers and performing technical analysis to identify the best time to enter and exit a position. It also includes a well-organized risk management plan to contain losses in case the price moves against you. The financial markets can be affected by a number of factors outside the economic sphere, including global politics, breaking news announcements and even natural disasters. Any unpredicted, sudden changes can cause sharp price swings which can be detrimental to your account and even lead to wipe-outs.

A solid risk management strategy helps you prevent uncontrolled losses, protect your capital, reduce emotional trading, achieve consistency, improve discipline and aim for profitability in the long run. To be able to hit all these targets, you need to incorporate tested practices in your trading:

1. Never risk a large percentage of your capital per trade Ideally, you do not want to be allocating more than 1% to 2% of your balance on a single CPI trade. This ensures you only risk a small portion of your trading funds, and a single loss cannot affect your trading in the long term.

2. Use Limit Orders The release of a CPI report often triggers high volatility. This can cause trading volume to dry up briefly and increase the risk of slippage – the risk of orders not being executed at the requested level but getting filled at a worse price than expected. Setting limit orders and pre-defining the execution price helps you have better control over limiting losses. However, make sure you set your stops wide enough to allow for normal price fluctuations and retracements without forcing trades to be stopped out prematurely.

3. Reduce Position Size Choosing the proper position size can protect your trade from the dangers of overexposure and changing financial conditions. To better determine the size of your position, take into consideration your risk tolerance, the post-CPI release market and the probability of your CPI trade based on your technical analysis.

4. Avoid Revenge Trading When met with setbacks, impulse and emotion can very easily take over from logic. Many of you may have already fallen into the trap of revenge trading – trying to recover from losing trades fast, only to end up with even more hits on your balance. To avoid this pitfall, you need to step away from the trading platform after a loss, give yourself some time to assess the situation and return with a calm, clear and focused mindset.

The Final Overview Understanding inflation and the economic effects of the CPI report is an advanced skill that can help you make more informed trading decisions and place higher-probability trades in markets whose inner workings you can now see more clearly. From explaining the importance of the US CPI, its interdependent relationship with other key economic indicators, the ways it can affect the decisions of the Federal Reserve and move the prices of USDJPY and gold to detailed step-by-step trading strategies for the globally popular assets, this article covers all you need to trade the CPI with precision and confidence.

The U.S. dollar gets hit after a weaker-than-anticipated jobs number.

EUR/USD Technical Analysis

EUR/USD spikes to 1.1557, piercing the 1.1550 resistance level after consolidating above the 200-period EMA near 1.1500. Source: TradingView The U.S. dollar has taken a bit of a hit early during the trading session on Friday as the jobs report came out negative. That was in contrast to the expectations of an addition of about 85,000 jobs. That of course had the markets going crazy for a moment, but when we look at the overall reaction in the euro, it made sense as we pierced the most recent resistance barrier.

But it looks like the market is revisiting that 1.1550 level. If it were to break down below there, that would, more likely than not, bring more questions than answers.

USD/CAD Technical Analysis

USD/CAD breaks below 1.3950 after losing the 1.4000 level, with the 0.382 Fibonacci retracement at 1.3980 now acting as resistance. Source: TradingView The U.S. dollar has fallen pretty significantly against the Canadian dollar, and that does make a certain amount of sense because they’re moving in two different directions from the employment standpoint. That being said, a huge part of Canada’s economy is very dependent on the U.S., so that is important.

The market is breaking below the 1.3950 level, and that could signify that perhaps things are starting to turn around a bit. But when looked at from the prism of the longer term, it is not until we get to the 1.39 level that we even have a 50% pullback. So, the recent rally higher and then the slow decay from here is typical behavior in this pair. Not much to look at other than it’s just more larger rangebound trading between the U.S. dollar and the Canadian dollar.

USD/JPY Technical Analysis USD/JPY trades at 157.75 after falling sharply from 163.00, with 160.00 as overhead resistance and 155.00 as support below. Source: TradingView The Japanese yen has rallied against the U.S. dollar initially, but we’ve seen a turnaround of some significance. It looks like traders are still willing to take the bet on that interest rate differential, and this, of course, has been a big pair as of late due to those interventions coming out of the United States and Japan.

It’s an interesting scenario that we find ourselves in as the market is trying to determine whether or not the intervention is something to fear, or if it just gave traders the opportunity to buy cheaper dollars. I myself have been long of this pair for a very long time, going back almost a year, and I looked at this as a potential buying opportunity when we broke down significantly. Whether or not that pans out remains to be seen, obviously, but the interest rate differential at the end of every day does attract traders.

If you’d like to know more about how to trade forex, please visit our educational area.

Key Highlights

USD/JPY started a recovery wave from the 155.25 zone. It cleared a short-term contracting triangle with resistance at 158.00 on the 4-hour chart. EUR/USD could correct some gains from the 1.1565 resistance. The US nonfarm payrolls could change by 80K in July 2026. USD/JPY Technical Analysis The US Dollar tumbled and tested 155.25 against the Japanese Yen. USD/JPY formed a base and started a recovery wave above the 156.50 resistance.

Looking at the 4-hour chart, the pair surpassed the 23.6% Fib retracement level of the downward move from the 163.95 swing high to the 155.28 low. It also cleared a short-term contracting triangle with resistance at 158.00.

However, the pair is still well below the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour). On the upside, the pair could face resistance near 158.80.

The next major resistance might be near the 50% Fib retracement level at 159.60. A close above 159.60 could start another steady increase. In the stated case, the bulls could aim for a move to 160.60 and the 100 simple moving average (red, 4-hour).

Any more gains might open the doors for a test of 162.00. If there is a fresh decline, the pair might find bids near 157.60. The next major support could be near 157.25. The main support might be 156.40. A downside break and close below 156.40 might send the pair toward 155.85. Any more losses could open the doors for a test of 155.25.

Looking at EUR/USD, the pair seems to be facing resistance near 1.1565 and might start a downside correction.

Upcoming Key Economic Events:

US nonfarm payrolls for July 2026 – Forecast 80K, versus 57K previous. US Unemployment Rate for July 2026 – Forecast 4.2%, versus 4.2% previous.

Titan FXhttp://titanfx.com

Titan FX is a technology driven online ECN forex and commodities broker that provides traders with next generation trading conditions, institutional grade spreads, fast trade execution, deep top tier liquidity and the security of financial registration and oversight.

Key Points:EUR/USD pulled back as traders focused on the disappointing Euro Area Retail Sales report.USD/CAD gained ground amid falling demand for commodity-related currencies. USD/JPY climbed towards the 158.50 level amid rising Treasury yields.

U.S. Dollar Gains Ground As Oil Prices Rally 4%

DXY 060826 4h Chart U.S. Dollar Index is moving higher as traders react to the Initial Jobless Claims report. The report indicated that 199,000 Americans filed for unemployment benefits in a week, compared to analyst forecast of 202,000.

Traders also react to the strong rally in the oil markets. Oil prices are up by +4% as Houthis attacked Saudi-backed forces in Yemen. Rising oil prices raised demand for safe-haven assets, which was bullish for the American currency.

Currently, U.S. Dollar Index is trying to settle above the resistance level at 99.85 – 100.00. In case this attempt is successful, U.S. Dollar Index will move towards the 50 MA at 100.35. A move above the 50 MA will push U.S. Dollar Index towards the resistance at 100.50 – 100.65.

EUR/USD Retreats As Euro Area Retail Sales Miss Estimates EUR/USD 060826 4h Chart EUR/USD pulled back as traders focused on the disappointing Euro Area Retail Sales report. The report indicated that Euro Area Retail Sales decreased by -0.3% month-over-month in June, compared to analyst forecast of +0.1%.

Traders also had a chance to take a look at the Factory Orders report from Germany. The report showed that Factory Orders increased by +3.1%, compared to analyst consensus of +0.3%.

EUR/USD attempts to settle below the support level at 1.1510 – 1.1525. If EUR/USD manages to settle below the 1.1510 level, it will move towards the 50 MA at 1.1479. A move below the 50 MA will push EUR/USD towards the support level at 1.1420 – 1.1435.

GBP/USD Remains Stuck Near Resistance At 1.3465 – 1.3480 GBP/USD 060826 4h Chart GBP/USD continues its attempts to settle above the resistance level at 1.3465 – 1.3480 despite rising oil prices. In the UK, traders focused on the Construction PMI report. The report indicated that UK Construction PMI improved from 38.4 in June to 44.7 in July, compared to analyst forecast of 40.

A successful test of the resistance at 1.3465 – 1.3480 will open the way to the test of the next resistance level at 1.3550 – 1.3565. RSI is in the moderate territory, so there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

USD/CAD Attempts To Rebound

USD/CAD 060826 4h Chart USD/CAD gains some ground as traders focus on the pullback in precious metals markets. Other commodity-related currencies are losing ground in today’s trading session.

If USD/CAD settles above the 1.4025 level, it will head towards the 50 MA at 1.4055. In case USD/CAD climbs above the 50 MA, it will move towards the resistance level at 1.4125 – 1.4140.

USD/JPY Moves Higher As Treasury Yields Rise USD/JPY 060826 4h Chart USD/JPY gained ground as traders focused on rising Treasury yields. The yield of 2-year Treasuries settled near the 4.25% level, while the yield of 10-year Treasuries climbed above 4.67%. Rising Treasury yields are bullish for USD/JPY due to the ultra-dovish policy of the BoJ.

From the technical point of view, USD/JPY attempts to settle above the resistance level at 157.50 – 158.00. If USD/JPY settles above the 158.00 level, it will head towards the next resistance level at 159.50 – 160.00. It remains to be seen whether BoJ is ready to provide additional support to the Japanese yen in the near term.

If you’d like to know more about how to trade forex, please visit our educational area.

Related Articles

USD/JPY Still in Focus, Rates Climb Again, Copper at an All-Time High, and XLF RisesUS Dollar Price Forecast: NFP Countdown Keeps DXY, EUR/USD and GBP/USD in FocusU.S. Dollar Retreats As ADP Report Misses Estimates: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPYAbout the Author

Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

U.S. Dollar Moves Lower As Traders Focus On Job Market Data

DXY 050826 4h Chart U.S. Dollar Index pulls back as traders react to the weaker-than-expected ADP Employment Change report. The report indicated that private businesses added 44,000 jobs in July, compared to analyst forecast of 70,000.

Traders also had a chance to take a look at the ISM Services PMI report for July. The report showed that ISM Services PMI improved from 54.0 in June to 54.1 in July, compared to analyst consensus of 54.5. Numbers above 50 show expansion.

U.S. Dollar Index failed to settle above the resistance level at 99.85 – 100.00 and pulled back towards the 99.75 level. In case U.S. Dollar Index settles below 99.75, it will head towards the nearest support, which is located in the 99.25 – 99.40 range.

EUR/USD Tests The 1.1550 Level EUR/USD 050826 4h Chart EUR/USD is moving higher as traders focus on U.S. economic data. Rising oil prices did not put pressure on EUR/USD as traders believe that U.S. and Iran will reach a temporary deal soon.

EUR/USD moved above the resistance at 1.1510 – 1.1525 and is trying to settle above the 1.1550 level. In case EUR/USD manages to settle above 1.1525, it will head towards the next resistance, which is located in the 1.1600 – 1.1615 range. RSI is close to the overbought territory, but there is enough room to gain additional upside momentum in case the right catalysts emerge.

On the support side, a move below the 1.1500 level will push EUR/USD towards the 50 MA at 1.1460. If EUR/USD declines below the 50 MA, it will head towards the next support at 1.1420 – 1.1435.

GBP/USD Gains Ground As Rebound Continues GBP/USD 050826 4h Chart GBP/USD is trying to settle above the resistance level at 1.3465 – 1.3480 as traders focus on general weakness of the American currency.

In case GBP/USD manages to settle above the 1.3480 level, it will move towards the resistance at 1.3550 – 1.3565. On the support side, a move below the 1.3420 level will push GBP/USD towards the 50 MA at 1.3385.

USD/CAD Tests Support At 1.4010 – 1.4025

USD/CAD 050826 4h Chart USD/CAD is losing ground as traders focus on the strong rally in precious metals markets. Gold and silver are up by +4% amid rising demand for precious metals. Other commodity-related currencies are mixed in today’s trading session.

Currently, USD/CAD is trying to settle below the support level at 1.4010 – 1.4025. If USD/CAD manages to settle below 1.4010, it will head towards the next support at 1.3920 – 1.3935.

On the upside, USD/CAD needs to settle above the 50 MA at 1.4064 to gain upside momentum in the near term. In this case, USD/CAD will head towards the resistance level at 1.4125 – 1.4140.

USD/JPY Stays Below The 158.00 Level USD/JPY 050826 4h Chart USD/JPY remains stuck near resistance at 157.50 – 158.00 as traders are cautious after recent interventions from BoJ. Treasury yields are moving higher, but this move does not provide sufficient support to USD/JPY.

If USD/JPY manages to settle above the 158.00 level, it will head towards the next resistance, which is located in the 159.50 – 160.00 range. A move above the 160.00 level will push USD/JPY towards the 50 MA at 160.84.

If you’d like to know more about how to trade forex, please visit our educational area.

US Dollar Talking Points: The carry trade in USD/JPY has been building for more than five years now and the Japanese Yen weakness that’s seen the pair rise by more than 50% over that time is a large point of imbalance across global foreign exchange markets. The Bank of Japan has no dire need for near-term rate hikes, as Japanese inflation is currently at 1.6-1.7%. They also have an inflation target of 2% but unlike the US, inflation is currently subdued below that waypoint. Nonetheless, US Treasury Secretary Scott Bessent hinted that Japanese officials should look to tighter policy following the posture around interventions last week after the FOMC and BoJ rate decisions.

It’s truly a conundrum for the Bank of Japan. On one hand, they’d probably prefer it if the Japanese Yen didn’t weaken dramatically against global currencies, like the US Dollar. But on the other, there’s no pressing demand for a rate hike as their inflation levels remain below the bank’s 2% target.

Allowing the currency to fall rapidly runs the risk of bringing on unsavory levels of inflation, which would require rate hikes and, in-turn, a threat to Japanese growth. And for a country with an aging and declining population who spent decades struggling with deflation and disinflation, risking that growth is a pretty unsavory concept particularly when there’s not a massive current demand for such.

On the part of the United States, however, there’s a couple of reasons that they would want to see some form of action. The USD/JPY spot rate sits near recently-established 40-year highs. As the second largest component of the DXY basket, the significant JPY weakness of the past five years has kept the value of DXY elevated, which makes trade a more difficult venture for the United States as exported products are more expensive and imports are relatively cheaper.

But perhaps the biggest risk – is that if Japanese policymakers wanted to continue to try to have their cake and eat it too, by using interventions to run stops on market participants while trying to draw some artificial line in the sand, without hiking rates to address the fundamental divergence between the two economies rate policies – that would probably entail Japan selling US Treasuries. And that would mean even higher US Treasury yields, and we’ve already seen the 30-year bond push up to a fresh 19-year high.

So this is really a story wrapped in intrigue and it can have repercussions far and wide depending on how aggressively it spins out of control.

That global carry trade is, in essence, a form of leverage. We saw what happens when just some of that leverage gets taken out back in July of 2024, when the BoJ intervened on the morning of a US CPI print and despite markets finally getting the confirmation they needed that rate cuts were on the way, the Nasdaq 100 put in a bearish engulf and then sold off with aggression over the next few weeks.

The reason was some of that leverage brought upon by the carry trade was taken out as USD/JPY unwound, and that hit levered markets like high flying AI tech stocks until calm started to return on the morning of August 5th.

We’re not at that point yet, but if Scott Bessent has his way the situation could produce unwelcome and unexpected repercussions fairly soon.

Where this matters for the US Dollar – it’s been obvious for some time that the current administration would like a weaker USD. Trump has said as much, extolling the benefit of a weak currency for exporting goods while making domestic goods more competitive on a cost basis. Those efforts have largely fallen flat over the past year-and-change as the USD is roughly flat since last April, and a big reason why is the run in USD/JPY which extended after last year’s election of Sanae Takaichi, thereby putting both central banks in a precarious spot.

For now, it’s difficult to get too excited about USD/JPY above 160.00 as that’s the type of level that may evoke another intervention or a threat of such. Meanwhile, the fundamental bias remains tilted to the long side of the pair and thusly, for the US Dollar as a whole, there’s a lean towards trend strategies for short-term strength and breakout strategies for broader weakness.

US Dollar Four-Hour Chart Chart prepared by James Stanley; data derived from Tradingview USD/JPY

Last week was one of the largest red bars in USD/JPY since that July 2024 episode, and already for this week it looks like bulls are starting to make a return. It’s still too early to say that the dust has settled but it also highlights what I was talking about in the weekend video, where interventions at or around that 155.00 level seem to make little sense. Thus, we’ve seen buyers return to bid the dip but what remains to be seen is whether there is another swing of intervention above 158 or perhaps upon a test of the 160.00 handle.

USD/JPY Weekly Price Chart Chart prepared by James Stanley; data derived from Tradingview EUR/USD Despite the Euro being a 57.6% allocation of the DXY basket it really does feel like the larger currency pair is along for the ride.

This makes sense if we consider that USD/JPY is up more than 50% over the past five years – and given that the only thing that can actually push price in a real market is demand it highlights that there’s still an imbalance of longs v/s shorts. And when that comes into question, even just a little bit, that USD-selling could happen across currency pairs and not just against the Japanese Yen.

I talked about this in last week’s webinar and I reiterated it this week. At this point it’s the 1.1500 level in EUR/USD that’s held the lows now for two consecutive days and there’s bullish structure in place down to the Friday swing low of 1.1455.

EUR/USD Daily Chart Chart prepared by James Stanley; data derived from Tradingview GBP/USD Cable built in a similar falling wedge into the Fed last week, and the response there was perhaps even more emphatic as buyers pounced on the bullish reversal. The challenge now for the pair is that 1.3500 level but there’s higher-low support potential around 1.3390 for bullish continuation scenarios.

GBP/USD Four-Hour Chart Chart prepared by James Stanley; data derived from Tradingview USD/CAD USD/CAD looks somewhat calm on a relative basis, following last week’s test and hold a the 1.4000 level. Following that test on Thursday, we’ve had higher lows, illustrating an element of bullish anticipation as buyers have stepped in with a bit more aggression over the past couple of days. This keeps the door open for short-term strength and for those looking for USD-strength, this may be a less chaotic backdrop than what showed in USD/JPY and perhaps a bit cleaner than EUR/USD or perhaps even GBP/USD which are vying for possible bullish trend scenarios.

USD/CAD Daily Chart Chart prepared by James Stanley; data derived from Tradingview --- written by James Stanley, Senior Market Analyst, Global Macro

The US dollar continues to fight back against several currencies, as the latest PMI numbers were hotter than expected.

USD/JPY Technical Analysis

USDJPY trades around 157.493, pulling back sharply toward the 155.000 level after slipping below its 50-day EMA. Source: TradingView. The US dollar has rallied a bit against the Japanese yen as we are trying to break above the 200-day EMA. The market breaking above the 200-day EMA on a close, I think, would be a very bullish turn of events. The hammer from the previous session on Monday does suggest that there is real support here, especially near the 155-yen level, but if we were to break down below there, it could really open the floodgates. Keep in mind that the Bank of Japan and the Federal Reserve intervened, that’s what caused this chaos, but the interest rate differential will continue to entice carry traders to hold the dollar against the yen, as they get paid at the end of the day.

USD/CAD Technical Analysis USDCAD trades around 1.40630, holding above the 1.40000 level and both its 50-day and 200-day EMAs. Source: TradingView. The US dollar has rallied against the Canadian dollar during the session as we are in the midst of forming a double bottom. Ultimately, this is a market that continues to see a lot of noisy behavior, but a push towards the upside, maybe towards 1.4150 again, could be possible. The 50-day EMA offering support comes into the picture as well, and the 38.2% Fibonacci retracement level has been tested twice and found supportive. This is an area that a lot of people seem to be watching.

USD/CHF Technical Analysis

USDCHF trades around 0.80920, easing from the 0.81500 level while holding above both its 50-day and 200-day EMAs. Source: TradingView. The US dollar slightly negative against the Swiss franc, but only barely so, and it looks like it’s in the midst of forming some type of double bottom as well. In fact, it looks very much like the US dollar Canadian dollar pair. And with that, this is a market that seems to be attracted to the 0.8150 level. The Swiss National Bank is very interested in keeping the Swiss franc weak, therefore that helps the carry traders here in this market.

If you’d like to know more about how to trade forex, please visit our educational area.

USD/JPY is trying to stabilise after its sharpest four-day loss in nearly two years, but the outlook remains fragile. Japan's intervention, backed by the US Treasury and supported by a new Fed repo facility, has increased the credibility of future yen-buying operations, leaving traders alert for opportunities to fade rallies.

View related analysis:

USD at a Crossroads: Can EUR/USD and AUD/USD Extend Their Gains? FX Futures Positioning: Yen, Euro Bears Caught Short | COT report Australian Dollar Outlook: AUD/USD Rally Meets ISM, NFP and DXY Support Japanese Yen Surges as MOF Steals the BOJ's Thunder After FOMC Why USD/JPY Risks Remain Despite the Sharp Selloff Fed Support Adds Weight to Yen Intervention The -3.2% loss for August marked the worst month for USD/JPY in fifteen and its most volatile trading range in six. Most of that loss occurred in the final two days of the month, thanks to intervention from Japan's Ministry of Finance (MOF) and support from the US Treasury. Traders remain on guard for further declines after the MOF vowed to intervene again, with the Fed making that easier by opening a repo facility for Japan. This allows Japan to borrow US dollars against its Treasury holdings to buy yen instead of selling US Treasuries, removing a key constraint on future intervention.

In simple terms, the facility gives Japan greater firepower to sell US dollars and buy yen, increasing bearish pressure on the greenback if authorities intervene again.

Source: ICE, TradingView

History Shows MOF Intervention Can Trigger Sharp USD/JPY Declines The weekly chart shows how deep USD/JPY corrections have been following MOF interventions. The pair has already fallen 5.3%, surpassing the post-intervention decline seen in April, although it still trails the deeper selloffs following MOF action in October 2022, November 2023 and July 2024.

Whether we'll see declines of a similar magnitude this time remains debatable, given the potential for further Fed rate hikes and persistent inflationary pressures from higher crude oil prices amid ongoing Middle East tensions. However, with the US Treasury and Fed backing Japan, MOF jawboning is more likely to cap rallies, while any future interventions now carry greater credibility. That could keep USD/JPY and other yen crosses firmly on traders' 'fade the rally' watchlists.

USD/JPY Technical Analysis: US Dollar vs Japanese Yen The daily chart shows the intense two-day selloff on Thursday and Friday culminated in a volatile doji. Notably, the session low held above the 155.00 handle, the May low and the monthly S1 pivot point. With the daily RSI also deeply oversold, bears may want to tread cautiously around these lows.

The 1-hour chart shows prices grinding higher in what could be a corrective pattern, while declining volumes suggest a lack of conviction among bulls. Even so, they may still attempt a move towards the 200-period EMA. If the MOF allows, a break above 158.00 brings the high-volume node (HVN) and monthly pivot point into focus around the 159.00 handle.

Should prices bounce from here, bears may look to fade rallies into those resistance levels, particularly with the backing of the MOF and Fed. A break below 155.00 would then bring the January low near 152.00 into focus.

Source: ICE, TradingView

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

USDJPY edged higher from new lowest level in almost three months, following three-day sharp fall on coordinated intervention by Japan’s authorities and US central bank, to support weakening yen.

Massive intervention buying lifted yen against US dollar (nearly 5%) and Euro (4.2%), with yen’s weekly gains of 3.9% vs dollar and 3.1% vs Euro.

The authorities signaled that further intervention cannot be ruled out that keeps near-term focus at the downside, with current (still mild) bounce, seen as positioning for fresh push lower for both currency pairs (USDJPY and EURJPY).

The USDJPY surged through daily Ichimoku cloud (spanned between 160.67 and 158.48), broke through 200DMA (157.92) and trendline support (157.10), while EURJPY broke 200DMA support (183.62), to hit the lowest since 17 Nov 2025 (179.36) on Monday.

Technical picture on daily chart turned bearish for both pairs, but stretched indicators after sharp fall suggest that bears may take a breather, though with limited upticks, due to persisting risk for possible further intervention.

USDJPY – broken 200DMA turned to solid resistance which capped today’s action and should ideally limit upticks, guarding next significant barrier at 158.48, provided by the base of thick daily cloud.

Fresh bears eye next pivotal supports at 155.02/154.78 (May 6 low / Fibo 38.2% of 139.88/163.98 rally) break of which to generate stronger reversal signal and support scenario of direction change of 16-month uptrend.

EURJPY- upticks should ideally hold below 182.50 zone (Fibo 38.2% of 187.43/179.36 post-intervention fall) to keep bears intact for firm break through cracked 180 psychological support and acceleration towards 175.28 (Fibo 38.2% of 154.79/187.94) and 172.70 (100WMA) in extension.

Windsor Brokers Ltdhttp://www.windsorbrokers.com/

The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

The United States joined Japan in buying yen to contain disorderly currency moves, protect the US Treasury market and prevent Japan’s financial strains spilling into the global economy. The Japanese Yen strengthened sharply on Monday after Japan confirmed that Washington had joined Tokyo in a rare coordinated intervention to support the currency.

Image: USD/JPY crashed as seen in the 24h chart Japan’s Ministry of Finance said it purchased yen alongside the US Treasury on Friday to counter “excessive volatility and disorderly movements” after the currency fell towards a 40-year low near ¥164 against the Dollar. Finance Minister Satsuki Katayama warned that the two countries would not hesitate to intervene again.

At the time of writing, the US Dollar to Yen exchange rate (USD/JPY) was trading around 156.63, down 0.52% on the day. The pair briefly plunged towards 155.27 overnight before recovering, extending its retreat from levels above 163 in late July.

Latest — Exchange Rates:

Dollar to Yen (USD/JPY): 156.62001 (-0.53%)

Euro to Dollar (EUR/USD): 1.153244 (+0.02%)

Pound to Dollar (GBP/USD): 1.347124 (-0.08%)

Washington’s involvement was not simply an act of support for a key Asian ally.

Japan had already spent heavily buying yen, with Bank of Japan data suggesting that Tokyo may have deployed almost $59 billion during Thursday’s intervention. Funding further action by selling US government bonds risked driving Treasury prices lower and pushing American borrowing costs higher.

The US intervention therefore helped address two risks at once: a destabilising collapse in the yen and the possibility that Japan could become a forced seller of Treasuries as it raised dollars to defend its currency.

The Federal Reserve’s FIMA repo facility could also allow Japan to obtain temporary dollar liquidity without selling its Treasury holdings outright.

US Treasury Secretary Scott Bessent described the facility as an important backstop and said Washington was prepared to participate in further coordinated action.

The move also supports the Trump administration’s trade agenda.

An exceptionally weak yen makes Japanese exports cheaper and can offset some of the competitive impact of US tariffs, while higher import costs are intensifying inflation and political pressure within Japan.

The intervention has forced traders to unwind large speculative bets against the yen, but officials may struggle to secure a lasting recovery without help from monetary policy.

The Bank of Japan kept its benchmark rate at 1.00% last week, although the coordinated action and increasingly forceful US pressure have strengthened expectations of another increase as soon as September.

Image: Dollar-Yen exchange rate performance over 2026 For USD/JPY, the immediate risk is now two-sided.

Further intervention could drive the pair back below 155.00, while a failure to follow the currency purchases with tighter Japanese policy could eventually allow the underlying US-Japan yield gap to reassert itself.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.

Key Points:The BOJ may consider raising its policy rate to 1.25% in September or October.Yen intervention and expectations of higher Japanese rates are pressuring USDJPY.USDJPY could extend its correction if it remains below key technical support.

PREMIUM

Read what the experts are trading this weekExclusive analysis from FXEmpire top analysts — curated insights you won't find on the free site.

In-depth analysis

Curated reports

Top analysts

Unlock Premium

The Bank of Japan kept its policy rate at 1% in July. It came after a 25 basis point hike in June. But the last meeting did not indicate that the tightening cycle was over. The BOJ placed more weight on the risk of the underlying inflation exceeding its 2% target.

The depreciating yen has increased the pressure for higher interest rates. It increases the costs of imported fuel, food and industrial materials. While currency intervention can slow the rate of decline, it may not eliminate the big interest rate spread between Japan and the United States. That could mean that the BOJ needs to tighten policy to counter the primary driver of yen weakness.

In my view, the BOJ may consider a policy rate increase to 1.25% in September/October. September is now the first realistic window while October remains possible if policymakers want more inflation and wage data.

BOJ Interest Rate Decision Keeps September Hike in Focus The BOJ maintained the interest rates steady with 8-1 vote. But the board member Hajime Takata supported an immediate increase to 1.25%. This means that the tightening camp is beginning to grow within the bank as evidenced by his dissent. The bond yield of the 2-year Japanese bond also rose to 1.51% following the meeting. This suggests the bond market expects the interest rates to remain higher.

Governor Kazuo Ueda gave clear warning about the cost of waiting too long. He said that the lack of action could increase the risk of inflation. The bank would also begin to discuss these risks starting with its September meeting. This guidance opens the door for a potential rate hike in September.

This message was supported by the BOJ’s July forecast. The bank added that it would consider raising the policy rate if the economy and prices evolve in line with the bank’s expectations. The bank said that the financial environment is accommodative, as real interest rates remain negative. So, a 1% policy rate might still be too low if the inflation 2%.

The next move will depend on the upcoming data about inflation, wages and currency. The strong wage data and another increase in inflation expectations could warrant a September rate increase. The yen’s depreciation again may push the BOJ into a more urgent decision. The bank could hold off until October or December if these pressures ease.

Japan Inflation and Wage Growth Support Further BOJ Rate Hikes The annual inflation rate in Japan climbed to 1.7% in June and the core inflation rate to 1.6%. Both readings are below BOJ’s target. But they are not based on current prices and take into account government energy subsidies. The BOJ is expecting the core inflation to surge to above 2% in the second half of fiscal 2026.

The producer prices suggest the future inflation. These grew 7.1% year on year in June, following 6.6% growth in May. The chart below shows a strong rise in producer prices since March 2026. Most of this increase was due to increased energy, chemical and petroleum prices. The companies could shift some of these costs back to consumers, making it more difficult for the BOJ to maintain the rates.

The wage data also indicates additional tightening. The average cash earnings grew 3.2% year on year in May.

On the other hand, the real earnings grew 1.4% year on year and continue to grow in 2026 as seen in the chart below.

At the same time, business inflation expectations increased from 2.4% to 2.7%. When wages are growing, consumers can more easily afford higher prices and when expectations are increasing, inflation is more likely to continue.

Strong demand for semiconductors, high energy prices and the weak yen may continue to weigh on inflation. These forces are in favor of transitioning to 1.25% by the end of 2026.

If these factors remain positive and continue to grow, the BOJ could hike rates further to 1.5% in early 2027. But if the oil price drops and the yen continues to strengthen, the bank may be able to take a break after its next rate increase.

USDJPY Forecast as BOJ Rate Hike Supports the Yen The hawkish BOJ and suspected currency intervention pushed the USDJPY lower. The strength in yen at the end of July has pushed USDJPY to close the month around 157.40. This is around 3% down for July and opens the door for further correction in August.

If the BOJ raises rates, then the US dollar will become less attractive relative to the yen. This may put more pressure on USDJPY on the downside.

But the difference in rates between the U.S. and Japan is still quite large. The 2-year yield in the United States was nearly 4.31%, while in Japan it was around 1.51%.

If the BOJ hikes rates and US yields drop, USDJPY may retreat to the 152-155 area. But a BOJ rate hike and another US rate increase would drag the pair back towards 160.

USDJPY Technical Analysis as Pullback Reaches Key Support USDJPY dropped after marking a high at the 164 level and closed the month below the 157 level. This means that the breakout above the 160 level, which was triggered in June 2026, failed. USDJPY still needs to consolidate below the 160-162 area.

The weekly chart below shows that USDJPY has been trending within an ascending channel pattern since the January 2023 lows. If USDJPY continues to drop below 157 next week, it will likely continue its momentum toward the 149-150 area as seen by lower support of the ascending channel pattern.

The importance of the current support zone is highlighted on the daily chart, which shows that USDJPY closed slightly below the rising trend line and the 200-day SMA.

But this was the last day of the month, which triggered strong volatility in the financial markets. This means that a recovery above 158 next week and continued upside momentum may allow the pair to rally toward the 160 area.

However, if the pair continues to drop below the 157 level, it will open the door for a continued decline toward the 152 area. This level is marked by the red dotted support line.

But the RSI indicator shows an extremely oversold condition in the short term and indicates a rebound before the next drop. A recovery above 161.50 will suggest that the bottom has formed. This bottom may allow the pair to continue upside.

In Closing The BOJ has opened the door to another interest rate hike. Rising producer prices, strong wage growth and higher inflation expectations support the tighter policy. The weak yen also increases imported inflation. In my view, the BOJ may raise the policy rate to 1.25% in September or October. It could delay the move if inflation eases or the yen continues to recover.

The higher Japanese interest rates could place further pressure on USDJPY. A continued decline below 157 may push the pair toward the 150-152 area. But the oversold conditions could trigger the short term rebound first. A recovery above 161.50 would indicate that the bottom is confirmed and the pair is ready to move higher again.

Read more: BOJ Rate Hike to 1.25% Puts Japanese Yen in Focus

Related Articles

U.S. Dollar Pulls Back From Session Highs As Traders Stay Focused On Yen Intervention: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPYEUR/USD, USD/CA, and USD/CHF Forecasts – US Dollar Fights Back Across MajorsUSD/JPY, Copper, and DAX and Forecasts – BoJ Intervention & Inflation Risks Drive VolatilityAbout the Author

Muhammad Umair is a finance MBA and engineering PhD. As a seasoned financial analyst specializing in currencies and precious metals, he combines his multidisciplinary academic background to deliver a data-driven, contrarian perspective. As founder of Gold Predictors, he leads a team providing advanced market analytics, quantitative research, and refined precious metals trading strategies.

Editors’ Picks

Key Points:EUR/USD rebounded from session lows as traders reacted to inflation data from the EU. USD/CAD gained ground as precious metals markets pulled back.USD/JPY was extremely volatile after BoJ intervention.

PREMIUM

Read what the experts are trading this weekExclusive analysis from FXEmpire top analysts — curated insights you won't find on the free site.

In-depth analysis

Curated reports

Top analysts

Unlock Premium

U.S. Dollar Retreats From Session Highs

DXY 310726 4h Chart U.S. Dollar Index is swinging between gains and losses as traders react to the final reading of Michigan Consumer Sentiment report. The report indicated that Consumer Sentiment increased from 49.5 in June to 55.2 in July, compared to analyst forecast of 54.0.

Currently, U.S. Dollar Index is trying to settle below the support at 99.85 – 100.00. If U.S. Dollar Index manages to settle below the 99.85 level, it will head towards the next support, which is located in the 99.25 – 99.40 range. RSI has recently moved back into moderate territory, so there is enough room to gain additional downside momentum in the near term.

EUR/USD Rebounds Above The 1.1500 Level

EUR/USD 310726 4h Chart EUR/USD rebounded from session lows as traders remained focused on inflation data from the EU. Euro Area Inflation Rate increased from 2.8% in June to 2.9% in July, in line with analyst estimates. Euro Area Core Inflation Rate increased from 2.4% to 2.5%, while analysts expected that it would remain unchanged at 2.4%.

From the technical point of view, EUR/USD continues its attempts to settle above the resistance level at 1.1510 – 1.1525. If EUR/USD manages to settle above the 1.1525 level, it will move towards the next resistance at 1.1600 – 1.1615.

GBP/USD Tests Resistance At 1.3465 – 1.3480 GBP/USD 310726 4h Chart GBP/USD is mostly flat as traders react to the UK Nationwide Housing Prices report. The report showed that housing prices increased by +0.1% month-over-month in July, in line with analyst consensus.

Currently, GBP/USD attempts to settle above the resistance at 1.3465 – 1.3480. In case this attempt is successful, GBP/USD will head towards the next resistance level, which is located in the 1.3550 – 1.3565 range.

USD/CAD 310726 4h Chart USD/CAD is moving higher as traders react to the pullback in precious metals markets. Gold pulled back below the $4050 level, while silver declined below $57.50. Other commodity-related currencies are losing some ground in today’s trading session.

If USD/CAD manages to settle below the support at 1.4010 – 1.4025, it will head towards the next support level at 1.3920 – 1.3935.

USD/JPY Stays Volatile After BoJ Intervention

USD/JPY 310726 4h Chart USD/JPY is jumping back and forth in volatile trading after yesterday’s intervention from the Bank of Japan. According to Bloomberg’s estimate, Japan spent about $53 billion to provide support to the national currency. It should be noted that Japanese officials did not confirm the intervention.

Today, traders also focused on BoJ Interest Rate Decision. Normally, the rate decision would be the key event of the week, but the massive intervention served as a more important catalyst.

The Bank of Japan left the interest rate unchanged at 1%, in line with analyst estimates. One board member voted for a hike.

In case USD/JPY settles below the support at 159.50 – 160.00, it will head towards the next support level at 157.50 – 158.00. BoJ may try to intervene again as the yen is fundamentally weak. The currency requires additional support to break the current trend. In case BoJ does not intervene, USD/JPY bulls may calm down and push USD/JPY back above the 160.00 level.

If you’d like to know more about how to trade forex, please visit our educational area.

Related Articles

EUR/USD, USD/CA, and USD/CHF Forecasts – US Dollar Fights Back Across MajorsUSD/JPY, Copper, and DAX and Forecasts – BoJ Intervention & Inflation Risks Drive VolatilityUS Dollar Price Forecast: Dollar Retreats as ECB and BoE Hold Policy Steady; EUR/USD and GBP/USD RallyAbout the Author

Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

Market news from the European morning session - 31 July 2026

Headlines:

How have interest rate expectations changed after this week's events?BOJ governor Ueda says to expect to keep raising interest rates in response to economic, financial conditionsBOJ governor Ueda says will conduct monetary policy in a manner so as to not fall behind the curveBOJ leaves rates unchanged as expected. Vote was 8-1ECB's Kocher: Decisions to be based on incoming data to bring inflation back to the 2% targetEuro area inflation nudges up in July, keeps the pressure on the ECBFrench inflation accelerates in July, reaffirming the broader trend in the regionItaly July preliminary CPI +2.8% vs +2.8% y/y expectedGerman unemployment rises by slightly more than anticipated in JulySouth Korea's KOSPI extends rebound in closing stages of the week, now up 17% todayMarket update:

USD and AUD lead, CHF lags on the dayWTI crude up 0.7% to $84.20European indices mostly higher; S&P 500 futures up 0.5%US 10-year yields up 1.2 bps to 4.675%Gold down 1.1% to $4,057Bitcoin down 1.3% to $63,887As we count down to the end of the month, markets are still seeing some volatile swings in ending the week.

The rebound in tech shares continues after South Korea's benchmark KOSPI index posted near 18% gains today. And that's setting a more positive backdrop for broader markets.

European stocks are pushing modestly higher with the DAX up 0.7% and CAC 40 up 0.9%, while US futures are posting solid gains as well in looking to wrap up the week. S&P 500 futures are up 0.5% with Nasdaq futures up 1.3% currently. No hyperscaler worries this week is also helping to bolster the mood, for now at least.

Besides that, we once again had another taste of Japanese yen volatility with a suspected second round of intervention. USD/JPY recovered well from yesterday's drop to settle above 160.00 today before being shot back down to 158.55 in a jiffy during the session. It was a gradual recovery after but one that is quick to see the pair move back up by 0.3% to 160.05 currently.

At the same time, the dollar is seeing a modest bounce as well with EUR/USD down 0.3% to 1.1495 and USD/CHF up 0.5% to 0.8095 on the day.

In terms of economic data, we had euro area inflation numbers for July and they were a tad hotter than expected. That will just serve to keep the ECB on their toes ahead of a likely rate hike again in September.

In other markets, oil prices are settling just a little higher with WTI crude up 0.7% to $84.20 and 10-year Treasury yields also just a touch higher by nearly 2 bps to 4.68%. Meanwhile, gold is seen down 1.1% to $4,057 as the back and forth continues for precious metals.

Most Popular

investingLive European markets wrap: Eurozone inflation ticks up in July; USD/JPY intervention again?How have interest rate expectations changed after this week's events?ECB's Kocher: Decisions to be based on incoming data to bring inflation back to the 2% targetEuro area inflation nudges up in July, keeps the pressure on the ECBItaly July preliminary CPI +2.8% vs +2.8% y/y expectedStealth intervention causes wild swings in USD/JPY; focus stays on Middle East and next US CPIGerman unemployment rises by slightly more than anticipated in JulyGold fails to extend gains as traders await the US CPI and Middle East developments BOJ governor Ueda says will conduct monetary policy in a manner so as to not fall behind the curveFrench inflation accelerates in July, reaffirming the broader trend in the region

The Japanese Yen is surging accross the board in the American session on Thursday, without a clear catalyst. This development hints that Japanese authorities may finally be intervening in foreign exchange markets following days of speculation.

At the time of press, the USD/JPY pair was down 1.8% on the day at 160.55, while EUR/JPY was losing 1.5% at 184.80, and GBP/JPY was falling 1.4% at 215.45.

Developing story, please refresh the page for updates.

Japanese Yen Price Today The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHFUSD-0.35%-0.34%-1.80%-0.17%-0.76%-1.18%-0.72%EUR0.35%-0.01%-1.42%0.18%-0.43%-0.85%-0.36%GBP0.34%0.00%-1.40%0.17%-0.42%-0.84%-0.33%JPY1.80%1.42%1.40%1.60%1.00%0.56%1.09%CAD0.17%-0.18%-0.17%-1.60%-0.59%-1.01%-0.52%AUD0.76%0.43%0.42%-1.00%0.59%-0.41%0.08%NZD1.18%0.85%0.84%-0.56%1.01%0.41%0.54%CHF0.72%0.36%0.33%-1.09%0.52%-0.08%-0.54% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

USD/JPY held near 163.50 on Thursday, with the yen retreating slightly after strengthening in the previous session. The currency had been supported by a broader dollar decline following the Federal Reserve's decision to keep interest rates unchanged.

However, three FOMC members voted in favour of a rate hike, and Fed Chairman Kevin Warsh stressed that the pause should not be interpreted as a rejection of further policy tightening. Future decisions will continue to be data-dependent.

The Bank of Japan is also expected to keep rates unchanged on Friday but is likely to signal that further hikes remain possible to contain the yen's decline. Verbal interventions from Japanese authorities have so far provided little relief, and the BOJ has offered no clear guidance on the timing of its next move.

Geopolitical tensions have once again intensified, with media reports indicating that the United States has resumed airstrikes on Iran following attacks on American forces in the region.

Technical analysis

On the H4 USD/JPY chart, the market is forming a consolidation range around the 163.60 level, currently extending between 163.20 and 163.89. A move higher towards 163.60 is expected, with scope for the trend to extend to 164.15 and then to 164.85. The MACD indicator supports this scenario, with its signal line above zero but pointing downwards, indicating the potential for short-term consolidation before further upside.

On the H1 chart, USD/JPY has completed a downward move to the 163.20 level. A move higher towards at least 163.60 is expected next. A breakout above this level would open the way for a continuation towards 164.15. The Stochastic oscillator confirms this scenario, with its signal line above 50 and pointing upwards towards 80, indicating short-term bullish momentum.

ConclusionUSD/JPY is trading in a narrow range as markets digest the Federal Reserve's decision to hold rates steady, despite three dissenting votes and Chairman Warsh's insistence that the pause does not signal the end of tightening. The dollar's modest decline after the announcement provided some relief for the yen, although the currency remains vulnerable. Attention now turns to the Bank of Japan's policy meeting on Friday, where rates are expected to be left unchanged but with hawkish signals to support the currency. Geopolitical risks have re-emerged following reports of renewed US airstrikes on Iran. Technically, the pair appears poised for further upside towards 163.60 and beyond, with the BOJ's guidance and intervention risks likely to determine the near-term direction.

Economists say the Dollar-Yen could extend higher unless the BoJ signals faster rate hikes, with its three-month forecast at 159 now requiring several factors to align. The US Dollar traded close to 163.84 against the Japanese Yen on Wednesday, holding near its highest level of 2026 as markets awaited policy decisions from both the Federal Reserve and Bank of Japan.

USD/JPY has gained around 4.5% since the end of December and approximately 0.8% in July alone. The pair has also risen in five of the past six months, leaving the Yen under sustained pressure.

Latest — Exchange Rates:

Dollar to Yen (USD/JPY): 163.86431 (0.00%)

Euro to Dollar (EUR/USD): 1.137884 (-0.06%)

Pound to Dollar (GBP/USD): 1.328349 (-0.02%)

Rabobank says Friday’s BoJ meeting will come with one advantage: policymakers will already know the outcome of the Fed decision.

That matters because the bank believes the FOMC “may have more impact on the USD/JPY exchange rate than” the BoJ’s own announcement.

A surprise Fed hike would likely deliver another powerful Dollar boost. Rabobank does not expect that outcome, however, and says unchanged US rates could instead trigger “a little profit-taking on long USD positions”.

The Yen’s bigger test comes a day later.

Rabobank argues that recent BoJ comments may have been “specifically aimed at preparing markets for hawkish signals” from Friday’s meeting. Without them, the risk is straightforward: “an absence of hawkish signals from the BoJ this week could open the door for further upside pressure on USD/JPY”.

Image: USD/JPY year-to-date chart showing the climb from January lows near 152 towards 164 USD/JPY’s path this year helps explain why Rabobank thinks the BoJ cannot afford an ambiguous message. The pair has not simply spiked towards 164; it has rebuilt its advance in stages since May, repeatedly recovering from shallow setbacks.

That persistence is the uncomfortable part for Tokyo. Verbal warnings and earlier Ministry of Finance intervention have slowed the move at times, but neither has changed its direction for long. The chart therefore supports Rabobank’s view that intervention alone may be “too costly” when the underlying force is an appreciating US Dollar.

Rabobank notes that the MoF has not bought Yen in the open market since spending JPY11.73 trillion between late April and late May.

One explanation is cost. The bank says officials may simply consider it “too costly to push against an appreciating USD”, particularly while US rate expectations remain firm.

There are signs that Japanese policy support has had some impact. Although USD/JPY has climbed sharply, the Yen is still the fourth-best-performing G10 currency over the past three months because the Dollar has strengthened even more broadly.

Rabobank says this suggests “both the MoF’s intervention and the hawkish signals from the BoJ have had some impact in supporting the JPY”.

Near-Term USD/JPY Forecast: A Move Back to 159 Needs a Hawkish BoJ and Softer Fed Expectations Rabobank maintains a three-month USD/JPY forecast of 159, but admits that target “currently looks optimistic”.

A faster BoJ tightening cycle would help. The bank says an October rate increase, rather than waiting until December, could provide the Yen with support.

Japan’s inflation backdrop gives policymakers room to sound firmer. The BoJ has said an underlying price measure remains well above its 2% target, while wage negotiations have delivered another strong result.

Even that may not be enough on its own.

Rabobank says a move to 159 would likely require “various factors to come together”: greater reassurance over Japan’s fiscal outlook, a clearly hawkish BoJ and a decline in fears of further Fed tightening.

The final ingredient may prove decisive. As the bank puts it, “how far the JPY can recover versus the USD, if at all, is likely to be determined” by the Fed Chair’s message.

/ / Japanese Yen Technical Outlook: USD/JPY Poised for Breakout Ahead of Fed, BOJ USD/JPY is trading within a well-defined weekly range with major event risk on tap over the next few days. Will the Fed or BOJ trigger the breakout?

29/07/2026

7/29/2026 2:01:00 PM

Japanese Yen Technical Outlook: USD/JPY Multi-Timeframe Analysis Michael Boutros, FOREX.com Senior Market Analyst, examines the USD/JPY outlook ahead of the Federal Reserve and Bank of Japan rate decisions, highlighting the key technical levels, Treasury yield correlation and why a break above 164 could open the path toward 165. He also explains how market positioning, Fed expectations and BOJ policy could shape the next major move for the Japanese yen.

This content was created by an affiliate of FOREX.com and represents the views and opinions of the author/speakers, not the views and opinions of Forex.com, StoneX Group Inc., or its subsidiaries. The content has not been independently reviewed by FOREX.com.

Key USD/JPY Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts Swiss Franc Short-term Outlook: USD/CHF Rally Presses Yearly Trend Resistance Canadian Dollar Short-term Outlook: USD/CAD Rebound Challenges the July Downtrend Australian Dollar Outlook: AUD/USD Rally Tests Make-or-Break Resistance British Pound Short-term Outlook: GBP/USD Breakout Attempts Major Trend Reversal US Dollar Short-term Outlook: USD Uptrend Faces Make-or-Break Test After CPI Gold Price Short-term Outlook: XAU/USD Bulls Try to Carve Out a Low After 30% Drop --- Written by Michael Boutros, Senior Technical Strategist

Follow Michael on Twitter @MBForex

Open an account in minutes Experience award-winning platforms with fast and secure execution.

Web Trader platform Our sophisticated web-based platform is packed with features.