The outlook for USD/JPY and EUR/USD focuses next week on US interest-rate trends, centered on the July US CPI, and the possibility of coordinated Japan-US intervention. Developments in the Middle East and the BOJ’s release of its Summary of Opinions are also cited as market drivers.
USD/JPY is expected to trade next week with market participants assessing developments in the Middle East and US economic indicators against concerns about coordinated Japan-US yen-buying intervention. The expected ranges are ¥156.50–159.50 for USD/JPY and $1.1350–1.1650 for EUR/USD, with both pairs apparently approaching an important juncture.
Among the economic indicators, the July CPI will be the main focus. If inflation exceeds expectations, expectations of an FOMC rate hike could strengthen, potentially supporting the dollar. If the result falls short of expectations, a delay in the timing of a rate hike could weigh on the dollar. Retail sales and the preliminary Michigan index will also influence views on the US economy.
From a technical perspective, the 200-day moving average is being watched as a turning point that could determine the medium- to long-term direction. Attention is also warranted on the BOJ’s release of its Summary of Opinions and the possibility of yen-buying intervention by the government and the BOJ. Demand at US Treasury auctions is also expected to affect the dollar through its impact on interest rates.
In a review of the week of 3 August, the dollar initially fell amid coordinated Japan-US yen-buying intervention, then rebounded as uncertainty over the situation in the Middle East and yen selling came to the fore. EUR/USD remained range-bound.