Japan and the US jointly confirmed last week's coordinated yen-buying intervention, the first joint operation since 2011, and USD/JPY held above the 155 support level through Monday's session. Yen strength squeezed into the crosses instead, hitting AUD/JPY, NZD/JPY, GBP/JPY, CAD/JPY and CHF/JPY. Traders now watch whether that pattern holds or USD/JPY eventually breaks below 155.
Japan and the United States jointly confirmed last week's coordinated yen-buying intervention, the first joint operation since 2011, and moved to acknowledge it unusually quickly. The confirmation extended the yen's rally into Monday's session, yet USD/JPY stalled just above the 155 support level as buyers stepped in before the pair could test it decisively.
The pattern suggests traders don't yet believe the intervention was designed to force USD/JPY meaningfully below 155. Instead, it appears aimed at preventing a rapid return above 160. Whether that adjustment mechanism keeps squeezing carry trades in the crosses, or USD/JPY eventually breaks 155 outright, is one of the more important themes to watch this week.
Yen strength squeezes into the crosses
Instead of forcing USD/JPY through support, demand for the yen found another outlet. AUD/JPY led losses among the yen crosses, followed by NZD/JPY, while GBP/JPY, CAD/JPY and CHF/JPY also declined sharply. The pattern points to a broader reduction in yen-funded carry trades rather than outright dollar weakness.
Officials break from Japan's usual intervention silence
Rather than sticking to Japan's long-standing practice of declining to comment on intervention, officials on both sides moved quickly to acknowledge the operation. That reinforced the message that they stand ready to act again if necessary. The shift suggests policymakers are now placing greater value on intervention credibility than on strategic ambiguity.
Fed data week could sway September's rate outlook
Attention now turns to a week packed with top-tier US data, starting with ISM Manufacturing today and continuing through ISM Services, ADP employment and Friday's non-farm payrolls. Fed funds futures currently price a little over a 60% probability of a September rate hike, pointing to a lean toward tightening without strong conviction.
That data won't settle September policy on its own, but it will shape how much room the Federal Reserve has for another rate hike heading into next week's CPI report. A strong run of data would reinforce the case for tightening again if inflation stays sticky, while softer readings would raise the bar for one.
Source: ActionForex
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