Key points:

• Dollar creeps up slowly
• Japan inflation rises again
• Intervention risks still alive

Tokyo and Washington spent heavily to rescue the yen. Three weeks later, the dollar is already knocking on the danger zone again.

💴 The yen rescue starts wearing off

• The USD/JPY traded near ¥159 Friday, recovering most of its decline after coordinated US-Japanese intervention briefly pushed the pair from almost ¥164 toward ¥155.
• That bounce cost authorities tens of billions of dollars. Currency markets have responded with: lovely effort, see you at ¥160.
• Intervention can interrupt momentum, flush leveraged traders from crowded positions and create spectacular candles. It cannot permanently overpower interest-rate differences, fiscal concerns and capital flows.
• That makes ¥160 the immediate credibility test. A clean break above it would suggest traders no longer fear intervention as much as they did three weeks ago. If you are holding a dollar-long position, however, remember that Tokyo specializes in attacking when everyone feels comfortable.

🌡️ Inflation hands the BOJ a reason

• Japan’s headline inflation accelerated to 1.9% in July from 1.6%, data showed Friday, while core inflation rose to 1.8%. “Core” excludes volatile fresh-food prices, helping policymakers judge underlying pressure without letting one expensive cabbage rewrite the nation’s monetary policy.
• Core-core inflation, which also removes energy, increased to 1.9% — its first acceleration in nine months. The figures strengthen the case for another Bank of Japan hike after policymakers kept the policy rate at 1% in July, with one board member already voting for 1.25%.
• Economists increasingly see a quarter-point increase to 1.25% in September. Higher Japanese rates should support the yen by narrowing its yield disadvantage against the dollar. But traders have heard “BOJ normalization is coming” before, usually while watching the dollar-yen climb anyway.

📊 ¥160 remains the line to watch

• Technically, ¥160 is both psychological resistance and an intervention tripwire. A sustained move above it could reopen ¥163–¥164, where the previous rescue operation began. Below, ¥157 is the first meaningful support area, followed by the post-intervention low near ¥155.
• The dollar is weakening more broadly as investors question US Treasury bond buybacks and America’s fiscal outlook.
• Yet the dollar-yen remains elevated because Japanese yields are rising for uncomfortable reasons too: inflation, enormous government debt and doubts over how quickly the BOJ can tighten.
• What to do now? Watch ¥160, Japanese rate expectations and US Treasury yields. Verbal warnings may create intraday jolts, but lasting yen strength probably requires the BOJ to deliver tighter policy — not another stern press conference followed by the dollar quietly walking upstairs.

Source: Tradingview