Fundamental Overview

USD

The US dollar experienced a broad-based sell-off during the latter part of last week. Initial weakness emerged following the FOMC rate decision, as the additional dissent from Fed's Kashkari was not interpreted as a significant hawkish surprise.

Heavy dollar-selling flows materialized on Thursday, driven by interventions from Japan and South Korea. Losses deepened on Friday when reports confirmed that the US Treasury had participated in the intervention—the first joint operation of its kind since 2011. Joint US–Japan intervention in currency markets is historically rare, making the participation of both nations a notable signal to markets. Both Japan's Ministry of Finance and US Treasury Secretary Bessent have stated they would not hesitate to conduct further joint interventions if needed.

With USD/JPY now trading around April–May levels, the probability of another intervention in the near term appears low, suggesting the dollar should resume trading on underlying fundamentals. The persistent interest rate differential between the Federal Reserve and the Bank of Japan remains a core driver of the pair's longer-term trajectory, as Japanese rates sit well below US rates. The fundamental backdrop remains largely unchanged, leaving market participants focused on upcoming US CPI data and further US–Iran developments. A de-escalation in tensions would likely keep the dollar under pressure by easing inflationary concerns and lowering the odds of a rate hike. Conversely, an escalation would likely lend support to the greenback amid Fed tightening risks. A hotter-than-expected CPI reading would likely cement expectations for a rate hike at the September FOMC meeting.

JPY

The Japanese yen appreciated sharply in the latter part of last week following coordinated intervention by Japan's Ministry of Finance and the US Treasury. The moves were likely amplified by a rare South Korean intervention, and when combined with month-end flows and overstretched positioning, the result was highly volatile price action.

On Monday, another push lower in the USD/JPY pair occurred, though BoJ data indicated no intervention took place, with low liquidity conditions likely responsible for the movement. That decline has since been fully erased, as speculators continue to re-enter positions at the more favorable levels created by the intervention.

Absent a shift in fundamentals, interventions are likely to serve only as clearing events that allow traders to rebuild positions at improved prices. The broader trend is unlikely to reverse without a dovish repricing of Fed interest rate expectations or an accelerated pace of tightening from the Bank of Japan, which has maintained a comparatively accommodative policy stance.

USD/JPY Technical Analysis – Daily Timeframe

On the daily chart, USD/JPY retraced all the way back to the key 155.00 level after breaking below the major trendline. The 155.00 handle has functioned as a recurring pivot zone for the pair, drawing both buyer and seller interest in recent sessions. Buyers stepped in around 155.00 with defined risk below that level, positioning for a potential rally toward new cycle highs. Sellers would need a decisive break below 155.00 to open the path toward the 152.00 level.

USD/JPY Technical Analysis – 4-Hour Timeframe

On the 4-hour chart, price is pulling back toward the broken trendline, which now acts as resistance. Sellers are expected to engage near this resistance with defined risk above it, aiming to push toward new lows. Buyers, meanwhile, will be watching for a higher break to increase bullish positioning into new cycle highs.

USD/JPY Technical Analysis – 1-Hour Timeframe

On the 1-hour chart, a minor upward trendline defines the current pullback. Buyers will likely continue to lean on this trendline with defined risk below it, targeting new highs. Sellers will look for a trendline break to press for a drop back toward the 155.00 handle. The red lines on the chart denote the average daily range for the session.

Upcoming Catalysts

• Today: US Job Openings data (JOLTS)
• Tomorrow: US ADP employment report and ISM Services PMI
• Thursday: Latest US Jobless Claims figures
• Friday: US Non-Farm Payrolls (NFP) report

US–Iran geopolitical developments will remain a key focus throughout the week.