USD/JPY holds just beneath 159.50 on Thursday, ahead 0.05% across a range of forty-two pips, a fifth consecutive session of grinding higher without getting anywhere. The pair remains beneath a declining 50-day Exponential Moving Average (EMA) that now sits directly on the 160.00 handle, comfortably above a rising 200-day just under 158.00, with the daily Stochastic Relative Strength Index (Stoch RSI) near 69 and climbing.
The intervention has been half given back
Late July took the pair to a high just short of 164.00 and then broke it, in the first joint operation between Tokyo and Washington since 1998, down to the 155.00 area inside two sessions. A record single-session commitment of 8.45 trillion Yen was followed by roughly 5.3 trillion more. Four weeks on, spot sits within about a dozen pips of the exact midpoint of that move, which means the market has taken back close to half of what the largest currency defence on record removed.
The reason it did not hold is that nothing in the operation touched the thing driving the pair. Japan’s policy rate is 1.00% against a US target range of 3.50% to 3.75%, a gap of roughly two and a half percentage points, and an intervention moves the level while leaving the carry intact. Even a September move to 1.25% still leaves better than two points of it, which is why the question has stopped being whether the increase arrives and become whether it is the opening of a cycle or another single step. Standing behind that gap is a fiscal position the market has spent the summer marking down, with the government’s stimulus programme and tax cuts widening a deficit no quarter point addresses, which is the second reason a defended level keeps leaking.
The increase is not an inflation decision
Tokyo Consumer Price Index (CPI) core, the measure excluding fresh food, accelerated to 1.9% in July from 1.6% in June, a six-month high that beat a 1.7% expectation and marked a second straight month of acceleration. Thursday’s consensus takes it straight back down to 1.7%. National core sat at 1.8% in July, also beneath the 2% target, and only the central bank’s own underlying gauge is running above it.
Pricing has moved the other way regardless. September odds have climbed from roughly 65% on August 7 to just under 80%, driven in part by reports that the government would welcome earlier tightening, which is a political input rather than a price one. The inflation that does exist is imported, raw material and energy costs passing into ordinary household goods through a weak currency, so the exchange rate is both the complaint and the remedy. On that reading a soft Tokyo print changes the alibi and not the decision, and a deputy governor spent Thursday saying the committee will discuss further tightening.
What lands, and when
The Tokyo numbers arrive at 23:30 GMT Thursday, headline and the ex food and energy measure both from a 2% prior, core from 1.9%, with July unemployment alongside at 2.5% unchanged. One caveat travels with the print: the statistics bureau moved the CPI base year from 2020 to 2025 with July’s data, so MoM comparisons across that seam are not clean. Friday then belongs to the Dollar. The Fed Chair’s first Jackson Hole keynote lands at 14:00 GMT as prepared text with no questions taken, sharing the minute with the preliminary annual benchmark revision to the establishment survey, and the Chicago Purchasing Managers Index (PMI) precedes it at 13:45 GMT with a 57 consensus from 57.6. Japan’s Governor is not in Wyoming this week.
Japanese retail trade follows at 23:50 GMT Sunday from 0.5% on the year and minus 4.1% on the month. Next week is a US labour week: the manufacturing survey Tuesday at 14:00 GMT with a 55.3 consensus from 55.6, job openings at 7.359 million, the private payrolls estimate Wednesday at 12:15 GMT from 44K, the Beige Book that evening, the services survey Thursday from 54.1, and August payrolls Friday at 12:30 GMT with the prior at minus 23K and unemployment 4.1%. The Bank of Japan meets on September 17 and 18.
Levels
Resistance: The 160.00 handle is the line and a declining 50-day EMA now sits on top of it, a confluence the pair has not reclaimed in the four weeks since the operation. Above it 160.50, then the 161.50 area.
Support: 159.00 is the near shelf, then 158.50 and the rising 200-day EMA just under 158.00, with the intervention low in the 155.00 area far beneath that.
Bias: Bearish while 160.00 caps. A Stoch RSI near 69 with room above it allows one more attempt at the handle, but a level defended by a falling average, a policy meeting three weeks out and the memory of a record operation is the wrong one to buy into. Invalidation on a daily close above 160.00.
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