USD/JPY in positive territory: Yen gives back intervention gains

USD/JPY rose to 159.53 on Thursday, returning towards the 160.00 area as the Japanese yen weakened. The move has kept markets on alert for possible further intervention by the authorities amid persistent currency weakness.

Fundamental factors continue to weigh on the yen: a wide interest rate differential, rising fiscal risks, and elevated energy and import costs.

The yen failed to gain much traction even after softer US inflation data, which eased pressure on the Federal Reserve and reduced the likelihood of an imminent rate hike.

In Japan, producer prices rose 7.2% year-on-year in July, slightly below the 7.3% recorded in June and the 7.4% forecast. At the same time, the Bank of Japan’s summary of opinions from the July meeting noted growing risks of accelerating inflation, with one board member acknowledging that the pace of rate hikes could quicken.

Technical analysis

On the H1 chart, USD/JPY has completed an upward move to 159.52. A consolidation range is currently forming below this level. An upside breakout would open the way for a move higher to at least 160.50. The Stochastic oscillator confirms this scenario, with its signal line above 50 and trending upward towards 80, indicating short-term upside momentum.

On the H1 chart, USD/JPY has completed an upward move to 159.52. A consolidation range is currently forming below this level. An upside breakout would open the way for a move higher to at least 160.50. The Stochastic oscillator confirms this scenario, with its signal line above 50 and trending upward towards 80, indicating short-term upside momentum.

Conclusion

USD/JPY has moved back into positive territory as the yen’s post-intervention gains continue to fade. Despite softer US inflation data reducing pressure on the Fed, the yen has failed to capitalise, underscoring the persistent fundamental headwinds – interest rate differentials, fiscal risks, and high energy costs – that continue to weigh on the currency. Domestic producer price data came in slightly below expectations, but the Bank of Japan’s July meeting summary pointed to rising inflation risks and the potential for faster rate hikes. Technically, USD/JPY appears poised for further upside towards 160.50, with the market remaining on high alert for possible intervention by Japanese authorities as the pair approaches the key 160.00 level.