Persistent yen weakness and fading intervention effects push USD/JPY toward key resistance amid shifting Fed policy expectations.
The USD/JPY pair approached a critical upside breakout as yen intervention gains dissipated, driven by Japan’s unchanged monetary policy and a stronger US dollar. Japanese officials’ FX interventions failed to sustain yen strength due to weak macroeconomic fundamentals, including the Bank of Japan’s decision to hold rates at 0.75%.
US inflation data exceeded expectations this week, reinforcing the Federal Reserve’s cautious stance on rate cuts. Policymakers increasingly signal a willingness to consider rate hikes if inflation persists, contrasting with earlier easing bets. The potential reopening of the Strait of Hormuz could temporarily ease inflation concerns, but focus will shift back to US economic data and Fed policy.
Market positioning remains bearish on the dollar, but elevated oil prices or prolonged geopolitical tensions could trigger a hawkish Fed response, further supporting the greenback.