Japanese Yen muted on a soft US Dollar note

USD/JPY is going nowhere, pinned down as a weak US Dollar and Bank of Japan hike bets cancel each other out.
Japan's Q2 growth slowed and missed forecasts, but a September rate hike is still heavily favored.
BoJ's September decision is the next real catalyst.

Agustin Wazne FXStreet

USD/JPY is close to flat on Monday, holding the mid-159.00s region after a soft Japanese growth report overnight failed to shift it in either direction. The pair has been drifting between support at 158.60 and resistance just above 159.50 for five straight days. This is a standoff, not a trend.

August's run of underwhelming US data has trimmed expectations for a Federal Reserve (Fed) move next month, and that repricing continues to cap any Dollar rally. On its own, that argues for a lower USD/JPY.

The offset comes from Japan. Second-quarter GDP disappointed, with the annualized figure printing 1.1% against forecasts of 2.0% and slowing from the prior quarter as domestic demand, capital spending and consumption all came in soft. Normally, that would weigh on the Yen by muddying the case for tighter policy.

Overnight swaps still price in roughly an 80% chance of a Bank of Japan (BoJ) rate hike in September. The GDP deflator, up 2.6% on the year, was the key detail, reminding markets that inflation is running well above target even as growth stumbles.

The Middle East adds to that inflation picture rather than subtracting from it. The renewed escalation threat out of Iran, and the firmer Crude prices that come with it, cut both ways for the Yen. Japan imports its energy, so a higher Oil bill is a drag, but it also feeds directly into the price pressure the BoJ is now leaning against. If anything, that reinforces the case for a September hike.

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 159.45. The pair is consolidating between nearby support and overhead resistance. Price holds above the 20-period Simple Moving Average (SMA) at 159.31 but remains capped well below the 100-period SMA at 159.94. The Relative Strength Index (RSI) around 59 suggests moderately positive momentum without overbought conditions, hinting at a balanced near-term tone while the market digests recent gains.

On the topside, initial resistance is located at the horizontal barrier around 159.60, with the 100-period SMA at 159.94 reinforcing a higher cap if buyers extend the advance. On the downside, immediate support is seen at 159.35, followed by the 20-period SMA at 159.31. A break below these intraday floors would expose the next cushions at 159.19 and then 158.94, where previous buying interest has emerged.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Author

Agustin Wazne

FXStreet

Agustin Wazne joined FXStreet as a Junior News Editor, focusing on Commodities and covering Majors.

AUD/USD drops toward 0.6900 amid USD uptick, ahead of US NFP

AUD/USD meets fresh supply and drifts toward 0.6900 in the Asian session on Friday, near its lowest level since early July. The US Dollar regains traction near 17-month highs as oil-driven inflationary concerns counter reduced bets on an October Fed rate hike and the overnight pullback in US bond yields, weighing on the pair. Focus is now on the US jobs data.

USD/JPY holds steady near 158.00 after hot Tokyo CPI; US NFP awaited

USD/JPY consolidates near 158.00, the top end of its weekly range in the Asian session on Friday, moving little after hotter-than-expected Tokyo CPI, which backs the case for more BoJ rate hikes. Meanwhile, the US Dollar retains a bullish undertone near a one-and-a-half-year top amid oil-driven inflation fears and geopolitical uncertainties, supporting the pair ahead of US Nonfarm Payrolls.

Gold returns to the red and tests $4,150, with eyes on US NFP

Gold edges lower in a multi-day-old range near $4,150 in the Asian session on Friday as traders await the US NFP report for more cues about the Fed's policy path. The outlook will drive the US Dollar and the non-yielding bullion. Meanwhile, oil-driven inflation fears offset the overnight pullback in US bond yields, helping the USD to stand firm near a one-and-a-half-year high amid the US-Iran standoff.

WTI holds steady near $92.00 as US weighs sending more troops to Middle East

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $91.75 during the early Asian trading hours on Friday. WTI flatlines after a two-day gain as the United States (US) mulled sending another aircraft carrier group to the Middle East.

Why speculators slashed Yen longs by the most since August — and what that signals about risk

For much of the past month, the Japanese Yen (JPY) had become one of the market's preferred defensive trades. Hedge funds accumulated more than 170K net long contracts over four weeks as investors positioned for tighter Bank of Japan (BoJ) policy, persistent geopolitical uncertainty and a more cautious outlook for global growth.

Markets are pricing a Fed pause. The jobs data says the hike is still coming

The market has rapidly changed its mind about the Federal Reserve (Fed). Only a week ago, investors saw an October interest-rate hike as the most likely outcome. However, softer inflation and cautious comments from policymakers have since turned a pause into the dominant scenario. Yet beneath that dramatic repricing, the US economy is sending a considerably less dovish message.