US CPI and Treasury auctions will be the focus next week, with efforts by Japanese and US authorities to curb yen depreciation and the Federal Reserve's monetary policy direction expected to determine the market's course. After a temporary recovery, the yen is expected to face renewed pressure as vigilance toward the possibility of additional intervention and a Bessent bazooka intensifies.
The effects of the coordinated Japan-US intervention at the end of July are still lingering, while USD/JPY has rebounded from the ¥155 level to the ¥158 level. Attention will turn to key events in the second week of August, particularly US CPI and Treasury auctions.
The direction of USD/JPY next week will be driven mainly by US CPI and auctions of 3-, 10- and 30-year US Treasuries. Depending on the persistence of inflation and movements in US interest rates, upward pressure could intensify. If CPI remains subdued, however, USD/JPY could face short-term downside risk.
As yen depreciation accelerates, vigilance toward additional joint Japan-US intervention and the Bank of Japan's policy stance is expected to increase. Statements ahead of the G20 Finance Ministers and Central Bank Governors Meeting will also draw attention. The base case is for USD/JPY to recover on the back of higher US interest rates, but upside risks are expected to increase if the pair moves above ¥160.
In technical terms, USD/JPY plunged from around ¥163.99 to ¥155.22 before rebounding to the ¥158 level. Although it has recovered the 200-day moving average, the 75-day and 25-day moving averages are capping the upside. Both the possibility of a rebound toward around ¥160.00 while holding ¥158.00 and the risk of further downside if ¥158.00 is breached remain in play.