USD/JPY moved sharply higher and lower this week, influenced by the reaction to coordinated intervention by Japan and the US and by the employment report. On 7 August, the pair briefly recovered to the ¥158 range before plunging into the ¥156 range amid concerns over deteriorating US employment conditions. Going forward, the outlook is likely to depend on concerns over further intervention and upcoming US data.
USD/JPY saw volatile trading with little clear direction this week. On 3 August, renewed concerns over intervention pushed the pair down to ¥155.21. It then rebounded to the upper ¥156 range and edged higher around midweek as crude oil prices rose and US long-term yields remained elevated. On 7 August, it briefly recovered to ¥158.39.
However, US July nonfarm payrolls, released the same day, came in below expectations, dampening expectations of further US rate hikes. Dollar selling accelerated as long-term yields fell, and USD/JPY plunged to ¥156.68 before closing. It was a week marked by crosscurrents between concerns over intervention and expectations of a narrowing US-Japan interest-rate differential.
While the dollar is prone to rebound buying following the impact of coordinated intervention by Japan and the US, concerns over further intervention are likely to keep the pace of any recovery slow. The US July CPI report, a key August indicator, is due on 12 August, and the dollar could become volatile again depending on the results.
Market participants are closely watching US employment trends, crude oil prices and the US-Japan interest-rate differential. The outlook is for conditions to remain mixed, with both dollar-buying and dollar-selling factors present.