Key points:

• US dollar rises toward ¥160
• Intervention fears fade
• CPI report imminent

Tokyo and Washington knocked the pair from ¥164 to ¥155. One week later, dollar bulls are already wandering back toward the danger.

🧯 Historic intervention loses its bite

• The USD/JPY pair climbed to roughly ¥159.44 Wednesday, approaching the psychologically loaded ¥160 level.
• The yen has surrendered nearly half its intervention-driven rally after Tokyo and Washington jointly dragged the pair from a 40-year extreme near ¥164 toward ¥155.
• The intervention worked spectacularly as a short-term shock — but less convincingly as a lasting trend change.
• Officials supplied yen and sold foreign currencies, forcing (your?) bearish positions to unwind. Once the squeeze ended, the interest-rate gap quietly resumed doing what it does best.
• Japan’s rates remain far below those in the US, encouraging the carry trade: borrowing cheap yen and buying higher-yielding dollar assets.
• As long as that return remains attractive, traders have an incentive to rebuild yen shorts — even after officials demonstrate their very expensive displeasure.

🧾 US inflation gets the next swing

• July CPI arrives Wednesday, with economists expecting headline inflation of 0.1% monthly and 3.4% annually. Core CPI, which removes volatile food and energy prices, is forecast at 0.2% monthly and 2.5% yearly.
• A hotter reading — particularly core CPI of 0.3% or more — could strengthen expectations for a September Federal Reserve hike. Higher US yields would make dollar assets more attractive, potentially pushing the dollar-yen through ¥160.
• Cooler inflation would support a Fed pause, weaken Treasury yields and give the yen breathing room. July’s 23,000-job contraction already argues against tightening.

⚠️ ¥160 becomes a credibility checkpoint

• Technically, ¥160 is less ordinary resistance and more policy tripwire. A decisive break could reopen ¥163.70–¥164, but the faster the advance, the greater the risk of another intervention. Dollar bulls may be right on direction and still get flattened by official timing.
• Initial downside levels sit near ¥158 and ¥157, followed by the post-intervention zone around ¥155. A fall through that level would suggest officials achieved something durable.
• Intervention isn’t entirely powerless; it changes positioning, volatility and the cost of betting against the yen. But without a narrower US-Japan rate gap, it can resemble pushing a beach ball underwater. CPI can now decide whether the ball stays submerged — or smacks ¥160 again.

Source: Tradingview