[FX Market Update] USD/JPY Remains Soft – Examining the Sustainability of the Trend

[FX Market Update] USD/JPY Remains Soft – Examining the Sustainability of the Trend

✅ Current Situation and Market Moves

USD/JPY has been trading weakly within a 146.80–147.30 range over the past few days.
The backdrop is a complex mix of factors from both the U.S. and Japan.

• The Japan-U.S. trade agreement initially reduced uncertainty, triggering a yen-buying reaction.

• However, subsequent speculation over BoJ rate hikes and renewed pressure from President Trump for Powell’s resignation have kept the pair directionless.

• Meanwhile, equity markets have rallied, supported by risk-on sentiment following the easing of some uncertainties.

• The result: a tug-of-war between risk-driven yen selling and policy-driven dollar weakness/yen strength.

✅ Key Factors Behind USD/JPY Weakness

Japan-side Drivers:

• Markets expect the BoJ to maintain a gradual tightening path, supported by:

  • Fiscal expansion expectations

  • Persistent inflation outlook

• This stance persists despite ongoing political turbulence.

U.S.-side Drivers:

• President Trump continues to pressure Fed Chair Powell to resign.

• Concerns over Fed independence → lower U.S. Treasury yields → dollar selling pressure.

• However, strong U.S. economic data could still trigger dollar rebound potential.

Risk Scenario:

• If equities extend gains (risk-on environment), yen selling could re-emerge.

• For now, the balance between dollar-negative/yen-positive policy factors and risk-on yen-negative sentiment makes a strong directional move unlikely.

✅ Key Events This Week

Global PMI Flash Estimates (July):

• Focus on France, Germany, Eurozone, U.K., and U.S.

• PMI strength/weakness could influence ECB and Fed policy outlooks.

Policy Events:

• Turkey CBRT and ECB meeting → ECB widely expected to hold rates steady.

• Watch Lagarde’s comments for any forward guidance on rate cuts.

U.S. Data:

• Initial Jobless Claims (July 13–19)

• New Home Sales (June)

Trade Developments:

• Progress in U.S.-EU trade talks is critical.

• A quick deal similar to Japan is uncertain; failure risks renewed tariff threats.

Speeches & Events:

• Trump comments, headlines on U.S.-China/EU trade negotiations.

• Earnings season: Intel and other key corporates in focus.

✅ GBP-related Update

July CBI Industrial Orders:

• Actual: -30 (forecast: -28; prior: -33) → slight improvement, but still weak.

• Selling price index: +21 (forecast: +20) → persistent price pressures remain.

✅ Summary & Strategic Takeaways

• USD/JPY faces ongoing downward pressure, but lacks a decisive trigger for a breakout.

Next Key Drivers:

• U.S. rates and Fed independence concerns

• Japan political developments and BoJ stance

• Eurozone PMI and ECB rate outlook

Market Dynamics:
Highly sensitive to policy themes, trade negotiations, and PMI data.

Short-term View:

• Likely to stay range-bound around 147.00

• Market awaits a catalyst for a breakout

• Risk management essential in headline-driven environment