The US dollar sold off across the board last week after Japan, South Korea and the US Treasury carried out a coordinated intervention, pushing EUR/USD above 1.15 as USD/JPY reversed from a four-decade high. Attention is now turning back to fundamentals, with US CPI data and US-Iran developments seen as the next drivers.
The dollar sold off across the board last week after Japan, South Korea and the US Treasury carried out a coordinated intervention, driving EUR/USD above the 1.1420 trendline and on into the 1.1550 level as USD/JPY reversed from a four-decade high. The initial weakness had come from the FOMC rate decision, where extra dissent from Fed's Kashkari wasn't taken as a major hawkish surprise.
Joint intervention marks a rare operation
USD/JPY, which had climbed to 163.99 in July — the highest level in around 40 years, had fallen to the 157.7 area by August 4, dropping as low as 155.20 at the peak of yen strengthening. Japan's Ministry of Finance confirmed it bought yen jointly with the US Treasury on July 31, and according to Reuters the US side used euros rather than dollars for the operation, which helped support the yen without creating the impression Washington was aiming to weaken the dollar. It was the first joint intervention operation since 2011.
Both Japan's Ministry of Finance and US Treasury Secretary Bessent have said they will not hesitate to conduct more joint interventions in the future. With USD/JPY now trading around April-May levels, however, the chance of another intervention in the near term is low.
Euro side builds its own rate-hike case
The ECB left interest rates unchanged at its last meeting but signaled through post-meeting media leaks that it's ready to deliver a rate hike in September if the inflation outlook deteriorates. Most policymakers who spoke afterward stressed data-dependence and stopped short of pre-committing to a September move, citing a lack of clear evidence of second-round effects.
Markets are still pricing a 72% chance of a September rate increase. Friday's Eurozone flash CPI showed core inflation ticking up to 2.5% from 2.4% the prior month, keeping the September meeting live.
EUR/USD tests trendline resistance
On the daily chart, EUR/USD broke above a downward trendline near 1.1420 and extended gains into 1.1550, where the price rejected another major trendline. Sellers are likely to keep defending that level, while a break higher would open the door for buyers to press toward 1.1850.
A key swing low near 1.1455 sits on the four-hour chart and could draw fresh buying interest. For now, price action may stay rangebound until a fresh catalyst arrives from US-Iran developments or this week's US data, which includes Job Openings, the ADP report, ISM Services PMI, jobless claims and Friday's non-farm payrolls report.
Sources: Investinglive, MQL5 Traders' Blogs
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