The USD/JPY market is expected to remain focused on ¥158 as a barrier on a rebound next week, with interest-rate trends in Japan and the US the main drivers. Expectations for rate hikes by the BOJ and the Fed will be the market's focus as a succession of developments is scheduled for next week.
USD/JPY rose briefly to the ¥160 range this week before plunging, and the area around ¥158 is now being watched as a resistance zone on a rebound. While expectations for a Fed rate hike in August continue to linger, the pace of further BOJ rate hikes and fiscal concerns are expected to influence the yen's movements.
The focus next week will be Japan's revised April-June GDP figure and a 5-year Japanese government bond auction. An upward revision to GDP could support a BOJ rate hike. Movements in the short- and long-term yield differential will be closely watched as an important factor in determining turning points between yen appreciation and depreciation.
In the US, 3-year and 10-year Treasury auctions and CPI and PPI releases are scheduled, making long-term interest rates and inflation indicators major drivers of USD/JPY movements. Measures to improve liquidity in the government bond market as part of fiscal support could ease upward pressure on long-term interest rates, while a strong CPI reading could prompt a rebound toward a stronger dollar and weaker yen.
In technical terms, the area around ¥158.00 is being watched as a resistance zone, with the long- and short-term moving averages converging near this level. On the downside, the area around ¥155 is important, and a break below it could lead to the ¥154 range.